Insurance Ch 5

What is the term used for an applicant's written request to an insurer for the company to issue a contract, based on the information provided? A Insurance Request Form B Request for Insurance C Application D Policy Request

C Application An individual can submit an application to an insurer, which requests that the insurer review the information and issue an insurance contract.

The insurance policy, together with the policy application and any added riders form what is known as A Contract of adhesion. B Whole life policy. C Entire contract. D Certificate of coverage.

C 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.

What phase begins after a new policy is delivered? A Elimination period B Grace period C Free-look period D Insurability period

C Free-look period The Free-Look Period occurs after a policy is delivered. This period allows the insured to review the policy and return it for a refund of the premium within a certain time interval.

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

C 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).

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

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

An applicant for a health insurance policy returns a completed application to her agent, along with a check for the first premium. She receives a conditional receipt two weeks later. Which of the following has the insurer done by this point? A Approved the application B Issued the policy C Neither approved the application nor issued the policy D Both approved the application and issued the policy

C Neither approved the application nor issued the policy When the agent receives the application and issues a conditional receipt, the insurer has not yet approved the application and issued the policy.

Whose responsibility is it to determine if all of the questions on an application have been answered? A The insurer B The applicant C The beneficiary D The agent

D The agent It is the responsibility of the agent to make sure that the application has been properly signed and that all questions have been answered correctly.

To comply with Fair Credit Reporting Act, when must a producer notify an applicant that a credit report may be requested? A At the time of application B When the applicant's credit is checked C When the policy is delivered D At the initial interview

A At the time of application A notice to the applicant must be issued to all applicants for health insurance coverage.

In a replacement situation, all of the following must be considered EXCEPT A Exclusions. B Assets. C Benefits. D Limitations.

B Assets. In a replacement situation the agent must be careful to compare the benefits, limitations and exclusions found in the current and the proposed replacement policy.

An agent makes a mistake on the application and then corrects his mistake by physically entering the necessary information. Who must then initial that change? A Executive officer of the company B Insured C Agent D Applicant

D Applicant Any changes made to the application must be initialed by the applicant.

An agent is in the process of replacing the insured's current health insurance policy with a new one. Which of the following would be a proper action? A The old policy should stay in force until the new policy is issued. B There should be at least a 10-day gap between the policies. C Policies must overlap to cover pre-existing conditions. D The old policy must be cancelled before the new one can be issued.

A The old policy should stay in force until the new policy is issued. The agent must make sure that the current policy is not cancelled before the new policy is issued.

An agent is ready to deliver a policy to an applicant but has not yet 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 had 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.

What is the best way to change an application? A Draw a line through the incorrect answer and insert the correct one. B Start over with a fresh application C Erase the previous answer and replace it with the new answer D White-out the previous answer

B Start over with a fresh application Most companies require that the app be filled out in ink. The agent might make a mistake when filling out the app or the applicant might answer a question incorrectly and want to change it. There are two ways to correct an application. The first and best is to simply start over with a fresh application. If that is not practical, draw a line through the incorrect answer and insert the correct one. The applicant must initial the correct answer.

Which is true regarding obtaining underwriting sources? A It is illegal to obtain information from outside sources in order to determine an applicant's insurability. B The applicant must be informed of the sources contacted and how the information is being gathered. C The insurer does not need to inform the applicant of how the information is gathered; informing only of the source is sufficient. D The insurer only needs to inform the applicant of how the information is being gathered; it is not necessary to disclose the sources.

B The applicant must be informed of the sources contacted and how the information is being gathered. It is required by law that an insurer informs the applicant of all sources that will be contacted in determining the applicant's insurability, in addition to how the information will be gathered.

Underwriting is a major consideration when an insured wishes to replace her current policy for all of the following reasons EXCEPT A Due to age or health, the policy may change dramatically. B Pre-existing conditions that were previously covered may not be covered under the replacing policy. C Benefits may change. D Premiums always stay the same.

D Premiums always stay the same. Underwriting is important when replacement is involved. It is an underwriter's duty to evaluate risk and decide whether or not a person is eligible for coverage. When replacement is involved, the insured may be under the assumption that a replacing policy is in his/her best interests, but after being evaluated by an underwriter, where premium and risk are exchanged, an insured may not be paying the same premium or receiving the same benefits.

An insured is upset that her new health insurance policy was delivered to her by certified mail and not through her agent. Which of the following is true? A There is nothing wrong with this form of policy delivery. B The insured should complain to the insurer. C The insured should ask for a new policy to be delivered. D The policy will not be legal until it is delivered by an agent.

A There is nothing wrong with this form of policy delivery. Although it is advisable for an agent to personally deliver a policy, in order to answer any questions and insure delivery, it is legal for a policy to be effectively delivered without the presence of an agent. It is legal to deliver a policy through some types of mail.

An insurer is attempting to determine the insurability of an applicant and decides to obtain medical information from several different sources. Which entity must be notified of the investigation? A The applicant B The Commissioner of Insurance C The medical examiner D The State Department of Insurance Incorrect! It is required by law that an insurer inform the applicant of all sources that will be contacted in determining the applicant's insurability, in addition to how the information will be gathered.

A The applicant It is required by law that an insurer inform the applicant of all sources that will be contacted in determining the applicant's insurability, in addition to how the information will be gathered.

Which of the following entities can legally bind coverage? A Insurer B The insured C Federal Insurance Board D Agent

A Insurer Only insurers, not agents, can bind coverage.

On a health insurance application, a signature is required from all of the following individuals EXCEPT A The spouse of the policyowner. B The proposed insured. C The policyowner. D The agent.

A The spouse of the policyowner. Every health insurance application requires the signature of the proposed insured, the policyowner (if different than the insured), and the agent who solicits the insurance.

Which of the following is true regarding health insurance underwriting for a person with HIV? A The person may only be declined if he/she has symptoms. B The person may not be declined for medical coverage solely based on HIV status. C A person may be declined for HIV but not AIDS. D The person may be declined.

B The person may not be declined for medical coverage solely based on HIV status. The HIV consent form provides the insurance company with authorization to test for the presence of the HIV virus and applies to all life and health policies. Underwriting for HIV or AIDS is permitted as long as it is not unfairly discriminatory. Medical coverage, however, cannot be denied per recent health care reform (no exclusions for pre-existing conditions).

What document describes an insured's medical history, including diagnoses and treatments? A Individual Medical Summary B Comprehensive Medical History C Attending Physician's Statement D Physician's Review

C Attending Physician's Statement An Attending Physician's Statement (APS) is the best way for an underwriter to evaluate an insured's medical history. The report includes past diagnoses, treatments, length of recovery time, and prognoses.

Before a customer's agent delivers his policy, the insurer makes a last-minute change to the policy. The agent informs the customer of this change, and he accepts it. What must the agent do now? A The agent must notify the beneficiary of the change in policy. B If the change would affect the premium, the agent must have the customer sign a statement acknowledging the change. C The agent should ask the customer to sign a statement acknowledging that he is aware of the change. D Nothing. After the explanation, the agent is not legally bound to do anything else.

C The agent should ask the customer to sign a statement acknowledging that he is aware of the change. If the insurer makes a change to the policy, the changes must be explained to the insured, and the insured must sign a statement acknowledging that the changes were explained.

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