Chapter 1: Completing the Application, Underwriting, and Delivering the Policy

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?

$2,500

What 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

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

Consumer Report

What describes the following best describes the MIB?

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

What describes the specific information about a policy?

Policy Summer

Another name for a substandard risk classification is

Rated

Insurance is the transfer of

risk

In 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 except the applicant's A) Ancestry B)Credit history C) Habits D)Prior insurance

A) Ancestry

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

Premium amounts and surrender values

Which part pf an insurance application would contain information regarding the cause of death of the applicant's decreased relatives?

Medical Information

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

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

The Fair Credit Reporting Act

The Medical Information Bureau was created to protect

insurance companies from adverse selection by high risk persons

When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information?

Application

When must insurable interest exist in a life insurance policy?

At the time of the application

If an applicant for a life insurance policy is found to be substandard risk, the insurance company is most likely to

Charge a higher premium

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

Standard (There are three rating classifications that denote the risk level of insurers are standard, substandard, and preferred. The classification system helps insurers to decide of an insured should pay a higher premium.)

In comparison to consumer reports, which of the following reports describes a unique characteristic of investigative consumer reports?

The customer's associates, friends, and neighbors provide the report's data

What do 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.

What is the purpose of a conditional receipt?

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

What is the purpose of a disclosure statement in life insurance policies?

To explain features and benefit of a proposed policy to the consumer

An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering

Inspection Report (General report of the applicant's finances, character, work, hobbies, and habits)

What is a material misrepresentation?

A material misrepresentation is a statement that, if discovered, would alter the underwriting decision of the insurance company

According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer except A)Late Payments B)Failure to pay off loan C)Disputes regarding consumer report information D)Tax delinquencies

Disputes regarding consumer report information