Completing the Application, Underwriting, and Delivering the Policy

Who is a field underwriter?

Agent/Producer

What are the 4 elements of an insurance contract?

Agreement (offer and acceptance), consideration, competent parties, and legal purpose

What is a warranty in an insurance contract?

An absolutely true statement upon which the validity of the policy depends

When must insurable interest exist in a life insurance policy?

At the time of application

When must the policy summary for a life insurance policy be delivered to the policyowner?

At time of policy delivery

When a change needs to be made on the application for insurance, which is the best method for correcting the information?

Complete a new application or ask the applicant to initial the correction on the original application

Health contracts are prepared by insurers and must be accepted by the insured on an 'as is' basis. This describes what aspect of a health insurance contract?

Contract of adhension

At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?

Either on date of application or date of medical exam (whichever occurs last)

What type of report provides information about the applicant's hobbies, habits and financial status?

Inspection report

What 2 elements are necessary for a life insurance contract to have a legal purpose?

Insurable interest and consent

What entities make up the Medical Information Bureau?

Insurers

What are the 3 main instances when insurable interest exists in life insurance?

Insuring your own life, life of a family member, or life of business partners or someone who has financial obligation to policyowner

What report is used to assess risk associated with a health insurance applicant's lifestyle and character?

Investigative Consumer Report

Insurance is contract that protects insured from what?

Loss

Health insurance contracts are unilateral. What does that mean?

Only 1 party makes a legally enforceable promise

What is adverse selection?

People who are more likely to submit insurance claims are seeking insurance more often than preferred risks

How can health insurance policies be delivered to the insured?

Personally delivered by agent or mailed

What document describes the specific information about a policy?

Policy summary

What risk classification would typically qualify for lower premiums?

Preferred risk

What term describes the fee a person pays an insurance company to receive coverage?

Premium

If insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?

Provide applicant a Disclosure Authorization Notice

What is the best way to handle incomplete insurance applications?

Return the application to the applicant for completion

What is the main responsibility of a company's underwriting unit?

Risk selection

If agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?

Send application back to applicant for signature

What are 3 types of risk rating classifications in life insurance?

Standard, substandard and preferred

What law protects consumers from the circulation of inaccurate or obsolete information?

The Fair Credit Reporting Act

If applicant does not receive copy of new insurance policy, who would be held responsible?

The agent

Whose responsibility is it to determine that all the questions on an insurance application are answered?

The agent's

If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern?

The existence of insurable interest between applicant and insured

Who must have insurable interest in the insured?

The policyowner

What is insurance underwriting?

The process of risk selection and classification

How is the information obtained for an investigative consumer report?

Through interviews with the applicant's associates, friends and neighbors

During which stage in the insurance process do insurers evaluate information that identifies adverse selection risks?

Underwriting

In health insurance contracts, insured is not legally bound to any particular action; however, insurer is obligated to pay for losses covered by policy. What contract element does this describe?

Unilateral

In insurance, when is the offer usually made on a contract?

When insurance application is submitted

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

When insurer approves a prepaid application

When would a misrepresentation on an insurance application be considered fraud?

When it is intentional and material

When would a misrepresentation be considered material?

When it may alter the underwriting decision

When does an insurance policy go into effect?

When policy is delivered and premium is paid

What is the purpose of the agent's report during the application process?

discusses agent's personal observations about the proposed insured that may help in the underwriting process

What do individuals use to transfer their risk of loss to a larger group?

insurance

What is policy replacement?

new policy issued while existing policy is terminated or reissued with reduction in cash value

What is the name of the process that insurance companies use to determine whether or not an applicant is insurable?

underwriting