Life Insurance Study Guide

Which of the following statements is NOT true concerning insurable interest as it applies to life insurance?

A debtor has an insurable interest in the life of a lender

What is the purpose of a conditional receipt?

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

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report?

Must be informed of the source of the report

In insurance, an offer is usually made when

An applicant submits an application to the insurer

An insurance contract must contain all of the following to be considered legally binding EXCEPT

Beneficiary's consent

Who makes up the Medical Information Bureau?

Insurers

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

Signed waiver of premium

Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles?

Standard risk is representative of the majority of people

The Medical Information Bureau (MIB) was created to protect

Insurance companies from adverse selection by high risk persons

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

Why should the producer personally deliver the policy when the first premium has already been paid?

To help the insured understand all aspects of the contract

A producer agent must do all of the following when delivering a new policy to the insured EXCEPT?

Disclose commissions earned from the sale of the policy

An applicant who receives a preferred risk classification qualifies for

Lower premiums than a person who receives a standard risk

Which of the following would provide an underwriter with information concerning an applicant's health history?

The Medical Information Bureau

An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant dies the following day, which of the following is TRUE?

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

An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?

The date of medical exam

Which is generally true regarding insureds who have been classified as preferred risks?

Their premiums are lower

All of the following are requirements for life insurance illustrations EXCEPT?

They must be part of the contract

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?

Unilateral

In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?

Unilateral

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract?

Warranty

If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about

Whether an insurable interest exists between the individuals.

If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than?

With the policy

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?

3 days

The term "illustration" in a life insurance policy refers to

A presentation of nonguaranteed elements of a policy

All of the following information about the applicant is identified in the General Information section of a life insurance application EXCEPT?

Education

Another name for a substandard risk classification is?

Rated

What is the purpose of the buyer's guide?

To allow the consumer to compare the costs of different policies

If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's?

Ancestry

Which of the following is the basic source of information used by the company in the risk selection process?

Application

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

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

Standard

If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE?

The policy will be interpreted as if the insurer waived its right to have an answer on the application

The responsibility of making certain that an application for insurance is filled out completely, correctly, and to the best of his or her knowledge is the responsibility of whom?

The producer

Which of the following reports will provide the underwriter with the information about an insurance applicant's credit?

Consumer report

Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?

Fair Credit Reporting Act

What describes the specific information about a policy?

Policy Summary

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

Premium amounts and surrender values

Which of the following is NOT the consideration in a policy?

The application given to a prospective insured

Which of the following includes information regarding a person's credit, character, reputation, and habits?

Consumer report

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as a

Contracts of adhesion

An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?

When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?

Material misrepresentation

If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination?

The insurers

Which of the following best describes the MIB?

It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance

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

Insurable interest and consent

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will.

Issue the policy anyway and pay the face value to the beneficiary

If an agent fails to obtain an applicant's signature on the application, the agent must?

Return the application to the applicant for a signature

All of the following are duties and responsibilities of producers at the time of application EXCEPT

Change any incorrect statement on the application by personally initialing next to the corrected statement

Which of the following information about the applicant is Not included in the General Information section of the application for insurance?

Medical background