Completing The Application, Underwriting, And Delivering The Policy

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will A) Pay the policy proceeds only if it would have issued the policy. B) Pay the policy proceeds up to an established limit. C) Not pay the policy proceeds under any circumstances. D) Automatically pay the policy proceeds.

A) Pay the policy proceeds only if it would have issued the policy. Correct! The conditional receipt says that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, as long as the applicant is found to be insurable as a standard risk, and policy is issued exactly as applied for.

Which of the following would provide an underwriter with information concerning an applicant's health history? A) The inspection report B) The Medical Information Bureau C) A medical examination D) The agent's report

B) The Medical Information Bureau Correct! An agent's report and inspection report provide personal information. Medical exams provide information on current health. Only the MIB will provide information about an applicant's medical history.

An applicant who receives a preferred risk classification qualifies for A) Dividends payable for lack of claims. B) Higher premiums than a person who receives a sub-standard risk. C) Higher premiums than a person who receives a standard risk. D) Lower premiums than a person who receives a standard risk.

D) Lower premiums than a person who receives a standard risk. Correct! The preferred risk category is reserved for those persons with a superior physical condition, lifestyle, and habits.

In forming an insurance contract, when does acceptance usually occur? A) When an insured submits an application B) When an insurer's underwriter approves coverage C) When an insurer delivers the policy D) When an insurer receives an application

B) When an insurer's underwriter approves coverage Correct! 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.

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? A) Warranty B) Aleatory C) Adhesion D) Subrogation

B) Aleatory

The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What should the insurer do with the application? A) Acknowledge the missed questions with a signature and continue the policy issue process B) Proceed with issuing a policy C) Return to the applicant for completion D) Answer the missed questions for the applicant

C) Return to the applicant for completion Correct! Any unanswered questions need to be answered before the policy is issued. If the insurer receives incomplete applications, they need to be returned to the applicants for completion.

Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives? A) Inspection Report B) Agent's Report C) General Information D) Medical Information

D) Medical Information Correct! Part 2 - Medical Information of the application includes information on the prospective insured's medical background, present health, any medical visits in recent years, medical status of living relatives, and causes of death of deceased relatives.

If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT A) Erase the incorrect answer and record the correct answer. B) Draw a line through the first answer, record the correct answer, and have the applicant initial the change. C) Note on the application the reason for the change. D) Destroy the application and complete a new one.

A) Erase the incorrect answer and record the correct answer. Correct! An agent should not use white-out, erase or obliterate any answers given to a question on an application. It could prevent an insurer from contesting the application, should it be necessary.

Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles? A) Standard risk requires extra rating. B) Standard risk is also known as high exposure risk. C) Standard risk is representative of the majority of people. D) Standard risk pays a higher premium than a substandard risk.

C) Standard risk is representative of the majority of people. Correct! Standard risks are representative of the majority of people in their age and with similar lifestyles. They are the average risk.

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

D) The applicant has a prior felony conviction. Correct! 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 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? A) As of the application date B) As of the policy delivery date C) As of the first of the month after the policy issue D) As of the policy issue date

A) As of the application date Correct! If the full premium was submitted with the application and the policy was issued as requested, the policy coverage effective date would generally coincide with the date of application.

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT A) Conditions. B) Consideration. C) Legal purpose. D) Offer and acceptance.

A) Conditions. Correct! Conditions are part of the policy structure. Consideration is an essential part of a contract.

Another name for a substandard risk classification is A) Declined. B) Elevated. C) Rated. D) Controlled.

C) Rated. Correct! Substandard risk classification is also referred to as "rated" since these policies could be issued with the premium rated-up, resulting in a higher premium.

If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant A) With the policy. B) Upon issuance of the policy. C) Within 30 days after the first premium payment was collected. D) Prior to filling out an application for insurance.

A) With the policy. Correct! If a life insurance policy contains a free-look period of at least 10 days, the buyer's guide can be delivered with the policy. If it doesn't, the buyer's guide must be delivered prior to accepting the initial premium.

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? A) $1,000 B) $100 per violation C) Revocation of license D) $2,500

D) $2,500 Correct! An individual who willfully violates this Act enough to constitute a general pattern or business practice will be subject to a penalty of up to $2,500.

The Federal Fair Credit Reporting Act A) Regulates telemarketing. B) Prevents money laundering. C) Regulates consumer reports. D) Protects customer privacy.

C) Regulates consumer reports. Correct! The Federal Fair Credit Reporting Act regulates consumer reports, also known as consumer investigative reports, or credit reports.