Chapter: Completing the Application, Underwriting, and Delivering the Policy

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?

Consideration

In insurance, an offer is usually made when

an applicant submits an application to the insurer

In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT

applicants past income

Which of the following best describes the aleatory nature of an insurance contract?

exchange of unequal values

What describes the specific information about a policy?

policy summary

Upon policy delivery, the producer may be required to obtain any of the following EXCEPT

signed wavier of premium

Which of the following is a risk classification used by underwriters for life insurance?

standard

An applicant sign an application for $25,000 life insurance policy, pays initial premium, and receives a conditional receipt. If the applicant dies the following day, what happens?

the beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy

If a policy includes a free-look period of at least 10 days, the Buyers Guide may be delivered to the applicant

with the policy

Which of the following is a generic consumer publication that explains the life insurance in general terms in order to assist the applicant in the decision-making process?

Buyers Guide

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristics does this describe?

Adhesion - is prepared by only the insurer: the insured's only option is to reject the policy as it is written.

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?

Aleatory

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?

As of the application date

All of the following are requirements for life insurance illustrations EXCEPT A They must identify nonguaranteed values. B They must differentiate between guaranteed and projected amounts. C They must be part of the contract. D They may only be used as approved.

C. they must be part of the contract

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies, and habits. What type of report is that?

Inspection Report

An underwriter may obtain information on a applicant's hobbies, financial status, and habits by ordering an

Inspection report

A life insurance policy has a legal purpose if both of which of the following elements exist?

Insurable interest and consent

The Medical Information Bureau (MIB) was created to protect

Insurance companies from adverse selection by high risk persons

What is the purpose of a conditional receipt?

It is intended to provide coverage on a date prior to the policy issue.

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will

Pay the policy proceeds only if it would have issued the policy.

Which of the following will be included in a policy summary?

Premium amounts and surrender values

Another name for a substandard risk classification is

Rated

The Federal Fair Credit Reporting Act

Regulates consumer reports

Which is appropriate action by the insurer if a prospective insured submitted an incomplete application?

Return the application to the applicant for completion

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage