Chapter 1 Quiz

Who must pay for the cost of a medical examination required in the process of underwriting? A) Department of Insurance B)Insurer C)Applicant D) Underwriters

B) Insurer If an insurer requests a medical examination, the insurer is responsible for the costs of the exam

Which of the following is NOT the consideration in a policy? A) The application given to a prospective insured B) Something of value exchanged between parties C) The premium amount paid at the time of application D)The promise to pay covered losses

A) the application given to a prospective insured Consideration is something of value that is transferred between 2 parties to form a legal contract

An insurance contract must contain al of the following to be considered legally binding EXCEPT A) Competent parties B) Beneficiary's consent C) Offer and Acceptance D)Consideration

B) Beneficiary's Consent The four essential elements of all legal contracts are: -Offer & acceptance -consideration -competent parties -legal purpose

Which of the following would qualify as a competent party in an insurance contract? A)The applicant is under the influence of a mind-impairing medication at the time of application B)The applicant has a prior felony conviction C)the applicant is intoxicated at the time of the application D) The applicant is a 12-year old student

B) The applicant has a prior felony conviction When an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. It is legal for a person convicted of a felony to buy an insurance contract . An intoxicated person ,however, may not be mentally competent, a 12-year-old student is considered to be underage in most states and a person under mind-impairing medication most likely would not be mentally competent

The insurance policy, together with the policy application and any added riders form what is know as... A)Entire Contract B)Certificate of Coverage C)Contract of adhesion D)Blanket policy

A) Entire Contract When a policy is issued, a copy of the application, any riders and amendments are attached to the back of the policy and become part of the entire contract

Who makes up the Medical Information Bureau? A) Hospitals B) Former Insured C) Physicians and Paramedics D) Insurers

D) Insurers The medical information Bureau is made up of insurers so the companies can compare the information they have collected on a potential insured with information other insurers may have considered

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe? A)Conditional B)Contingent C)Aleatory D)Unilateral

A) Conditional A conditional contract requires both the insurer and the policyowner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policy owner

An agent is ready to deliver a policy to an applicant but has not received payment. Upon delivery, the agent collects the applicant's premium check, answers any questions the applicant may have , and then leaves. What did he forget to do? A) Collect a late payment fee B)Ask her to sign a statement of Good health C) Offer her a secondary policy D) Ask the applicant to sign a statement that acknowledges that the policy has been delivered

B) ask her to sign a statement of good health If the premium is not collected until the policy is delivered, the agent must receive a statement of good health, which acknowledges that the insured's health status has not changed since the policy was approved

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? A)Contract of Adhesion B) Acceptance C)Consideration D)Legal Purpose

C) Consideration Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application.

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? A) Representation B)Adhesion C)Consideration D) Good faith

C) Consideration The binding force in any contract is consideration. Consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration of the insurer is the promise to pay in the even of loss.

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called.. A) Fraudulent statements B)Warranties C)Common errors D)Material misrepresentations

D) Material misrepresentations A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance comapny

In terms of parties to a contract, which of the following does NOT describe a competent party? A) The person must be mentally competent to understand the contract B)The person must have at least completed secondary education C)The person must not be under the influence of drugs or alcohol D)The person must be of legal age

B) The person must have at least completed secondary education The parties to a contract must be capable of entering into a contract in the eyes of the law. Generally, this requires that both parties be of legal age, mentally competent to understand the contract, and not under the influence of drugs or alcohol

Which of the following is true about the requirements regarding HIV exams? A)Results may be disclosed to the agent and the underwriter B) Prior informed oral consent is required from the applicant C) HIV exams may not be used as a basis for underwriting D)The applicant must give prior informed written consent

D) The applicant must give prior informed written consent A separate written consent form must be obtained prior to an HIV exam. HIV exam results may be disclosed to underwriters, but not agents

Under the privacy rules of HIPAA, protected information includes all individually identifiable health information... A) Held or transmitted in any form B)Transmitted electronically only C)Held in a computer format D) Held or transmitted in paper form

A) Held or transmitted in any form Under the privacy rule for HIPAA, protected information includes all individually identifiable health information held or transmitted by a covered entity or its business associate in any form or media, whether electronic, paper, or oral. This is called protected health information (PHI)

In insurance, an offer is usually made when... A) The agent hands the policy to the policyholder B) A agent explains a policy to a potential applicant C)An applicant submits an application tot he insurer D) The insurer approves the application and receives the initial premium

C) an applicant submits an application to the insurer In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy