Chapter 1 Exam FX completing application, underwriting, and delivering the policy.

In insurance, an offer is usually made when

An applicant submits an application to the insurer

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

If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?

5 days

What is a material misrepresentation?

A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company

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.

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

If it is intentional and material

The Medical Information Bureau (MIB) was created to protect

Insurance companies from adverse selection by high risk persons.

Who makes up the Medical Information Bureau?

Insurers

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting 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

As a field underwriter, a producer is responsible for all of the following tasks EXCEPT

Issue the policy that is requested

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

Medical Information Bureau

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

Medical background

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

Signed waiver of premium

Whose responsibility is it to make certain that an application for insurance is filled out completely and correctly?

The Producer

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.

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

Another name for a substandard risk classification is

rated

Conditional Contract

requires that certain conditions must be met by the policyowner and the company in order for the contract to be executed, and before each party fulfills its obligations. For example, the insured must pay the premium and provide proof of loss in order for the insurer to cover a claim.

Aleatory Contract

there is an exchange of unequal amounts or values. The premium paid by the insured is small in relation to the amount that will be paid by the insurer in the event of loss.

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

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?

Aleatory

Which of the following is NOT an example of a valid insurable interest?

Debtor in the life of the creditor

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

application

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

Policy Summary

a written statement describing the features and elements of the policy being issued. It must include the name and address of the agent, the full name and home office or administrative office address of the insurer, and the generic name of the basic policy and each rider. A policy summary will also include premium, cash value, dividend, surrender value and death benefit figures for specific policy years. The policy summary must be provided when the policy is delivered.

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

Unilateral Contract

only one of the parties to the contract is legally bound to do anything. The insured makes no legally binding promises. However, an insurer is legally bound to pay losses covered by a policy in force.

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

Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT

Other insurance coverages

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 documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years?

Policy summary

Contract of Adhesion

is prepared by one of the parties (insurer) and accepted or rejected by the other party (insured). Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. In other words, insurance contracts are offered on a take-it-or-leave-it basis by an insurer. Any ambiguities in the contract will be settled in favor of the insured.

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

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

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

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

Medical information

Buyer's Guide

provides basic, generic information about life insurance policies that contains, and is limited to, language approved by the Department of Insurance. This document explains how a buyer should go about choosing the amount and type of insurance to buy, and how a buyer can save money by comparing the costs of similar policies. Insurers must provide a buyer's guide to all prospective policy applicants prior to accepting their initial premium. If the policy contains an unconditional refund provision of at least 10 days (free-look period), a buyer's guide can be delivered with the policy.

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

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

Which of the following best describes the MIB?

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

What is the purpose of a conditional receipt?

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

Which of the following best describes the aleatory nature of an insurance contract?

Exchange of unequal values