Chapter 1
What is the maximum penalty for habitual willful noncompliance with the fair credit reporting act?
$2,500
Which of the following documents delivered to the policy owner includes information about premium amounts, cash values, and death benefits for specific policy years?
A policy summary
An insurer has made all of the decisions regarding the provision included in the insured's policy. The insured finds an objectionable provision and wants to negotiate it when the insurer but is not allowed to do so. Her only options are to reject the policy or accept it as it. Which contract feature does this describe?
Adhesion
An insurer has made all of the decisions regarding the provisions including in the insured's policy. The insured finds an objectionable provision and wants to negotiate it with the insurer but it is not allowed to do so. Her only options are to reject the policy or accept it as it is. Which contract feature does this describe?
Adhesion
An insurer pays a 100 premium every month for his insurance coverage, yet the insurer promises to pay 10,000 for a covered loss. What characterist of an insurance contract does this describe?
Aleatory
Concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
Aleatory An insurance contract is an aleatory contract in that it requires small amount of premium for a large risk
Which is the primary source of information used for insurance underwriting? A. Medical records B. Private investigations C. Application D. applicant interviews
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
When must insurable interest exist in a life insurance policy?
At the time of application
An insurance contract must contain all of the following to be consisdered legally binding except
Beneficiary consent
Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision making process?
Buyer's Guide
All of the following are duties and responsibilities of producers at the time of the application except
Change any incorrect statement on the application by personally initialing next to the corrected statement.
If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to
Charge an extra premium
To proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay for the death benefit to the beneficiary if the policy is approved.
Conditional
Representations are written or oral statements made by the applicant that are
Considered true to the best of the applicant's knowledge
Which of the rolling reports will provide the underwriting with the information about an insurance applications credit?
Consumer report
Which of the following includes information regarding a persons credit, character, reputation, and habits?
Consumer report Consumer reports include written and/or oral information regarding a consumer's credit, character, reputation, and habits collected by a reporting agency from employment records, credit reports, and other public sources.
Contracts that are prepared by one party and submitted to the other party on a take it or leave it basis are classified as
Contracts of Adhesion
According to the Fair Credit reporting act, all of the following would be consider negative information about a consumer except
Disputes regarding consumer report information
Which of the following best describes the aleatory nature of an insurance contracts?
Exchange of unequal values
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?
Fair Credit Reporting Act
Which of the following protects consumes against the circulation of inaccurate or obsolete personal or financial information?
Fair credit reporting act
When would a misrepresentation on the insurance application be concerned fraud?
If it is intentional and material
An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n)
Inspection report
Which of the following best describe MIB?
It is nonprofit organization that maintains underwriting information on applicants for life and health insurance
In the underwriting process, it was determined that the application for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium?
It will likely be higher because the application is a substandard risk
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
Which of the following information about the application is not included on part 1 of the application for insurance
Medical background
Under the fair credit reporting act, individual rejected for insurance due to information contained in consumer report
Must be informed of the source of the report Consumers must be advised and provided with the name and address of the reporting agency
What is a definition of unilateral contract?
One-sided: only one party makes an enforceable promise
A prospective insured receives a conditional receipt but dies before the policy is issued. The insured will
Pay the policy proceeds only if it would have issued the policy
What describes the specific information about a policy?
Policy summary
Which is the appropriate action by the insurer if a prospective insurer submitted an incomplete application?
Return the application to the applicant for completion
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?
Return to the applicant for completion
Which of the following statements is correct about standard risk classification in the same age group and with similar lifestyles?
Standard risk is representative of the majority of people.
Which of the following would qualify as a competent party in an insurance contract?
The applicant has a prior felony conviction
Which of the following is not the consideration in a policy?
The application given to a prospective insured
Which of the following is not the consideration in policy? A. The application given to a prospective insured B. Something of value exchanged between parties C. The premium amount paid at the time of the application D. The promise to pay covered losses
The application given to a prospective insured
An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant is killed in an automobile accident the next day,
The beneficiary would receive $25,000 if it was determined that the insured qualified for the policy applied for.
In insurance, an offer is usually made when
The completed application is submitted
Which of the following would provide an underwriter with the information concerning an application health history?
The medical information bureau
In terms of parties to a contract, which of the following does not describe a competent party?
The person must have at least completed secondary education.
An agent tries to sell insurance over the phone to an applicant who appears to be confused, but is eventually able to give enough information for the application to be completed. After the policy was issued, the agent talked to the insured's family and they explained that the insured was recovering form a surgery and might have been under the influence of medication at the time of application. Which of the following is true?
The policy may be voided if it can be proven that the application was not capable of making a buying decision at the time of the application
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
Which is generally true regarding insured who have been classified as preferred risk?
Their premium are lower
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
conditional
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is
conditional
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
conditions
Insurance is the transfer of
risk
Which of the following is a risk classification used by underwriters for life insurance?
standard
In insurance, an offer is usually made when
the application is submitted
If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?
unilateral
Which of the following would be considered a non medical insurance application?
An application on which the medical information is completed by the applicant and the agent only
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
Ancestry
In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT
Applicant's past income.
In classifying a risk, the home office underwriting department will look at all of the following except
Applicant's past income.
An insurer wants to begin underwriting procedures for an application. What source will it consult for the majority of its underwriting information?
Application
An individual applied for an insurance policy and paid the initial premium. The insurer issued a condition receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy effective date?
Date of medical exam
Which of the following is not an example of incurable interest?
Debtor in creditor
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.
A life insurance policy has a legal purpose if both of which of the following element exists?
Incurable interest and consent
An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that?
Inspection report
The medical information bureau (MIB) was created to protect
Insurance companies from adverse selection by high risk persons.
When y applied for insurance and paid the initial premium on aug 14, he was issued a condional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other as standard. Y was killed in automobile accident on aug 22, before the policy was issued. In this case, the insurance company will
Issue the policy anyways and pay the face value to the beneficiary
What is the purpose of conditional receipt?
It is intended to provide coverage on a date earlier than the date of the issuance of the policy.
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 individual must have incurable interest in the insured? A. Beneficiary B. Underwriter C. Producer D. Policyowner
Policyowner
Which of the following will be included in a policy summary
Premium amounts and surrender values
The Federal Fair Credit Reporting Act
Regulates consumer reports
Under the fair credit reporting act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must
Respond to the consumer's complaint.
If an agent fails to obtain an application signature on the application, the agent must
Return the application to the applicant for a signature
Which is generally true regarding insureds who have been classified as preferred risk?
Their premiums are lower.
What is the purpose of the buyers guide?
To allow the consumer to compare the costs of different policies
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
In insurance policies, the insured is not legally bound to ant particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by its policy. What contract element does this describe?
Unilateral
Which of the following is a statement that guaranteed to be true, and if untrue, may breach an insurance contract?
Warranty
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage
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
When is the earliest a policy may go into effect?
When the application is signed and a check is given to the agent
If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant
With the policy
An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?
application
Which is the primary source of information used for insurance underwriting?
application
Which of the following is the basic source of information used by the company in the risk selection process
application
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
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
consideration
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? A. Consideration B. Legal purpose C. Contract of adhesion D. Acceptance
consideration
Which of the following is not an essential element of an insurance contract
counteroffer
What do individuals use to transfer their risk of loss to a larger group?
insurance
Another name for a substandard risk classification is
rated