chapter 1: types of life policies
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.
what is the purpose of the buyers guide?
To allow the consumer to compare the costs of different policies
Contract where Only one of the parties to the contract is legally bound to do anything
Unilateral contract
if a consumer request additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?
5 days
Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
Aleatory
Which of the following will be included in a policy summary?
Premium amounts and surrender values
example: an investor buys a life policy on an elderly person in order to sell it for a life settlement.
STOLI policy
closest term to an authorized insurer
admitted
What is the document called delivered to Policy owner with info about premium amounts, cash value, surrender and death benefits for specific policy years?
policy summary
how is it determined whether an insurer is allowed to write business in a state
the insurers domicile or location of incorporation will determine wether a company is domestic, foreign, or alien
MIB was created
to protect insurance compANIES FROM adverse selection by high risk persons
Aleatory Contract
values exchanged are not equal
What is the maximum $$$ penalty for a habitual willful Noncompliance with the Fair Credit Reporting act?
$2,500
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in wiring that the report will be obtained?
3 days
If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern?
The existence of insurable interest between the applicant and the insured
Which of the following statement is NOT true concerning insurable interest as it applies to life insurance?
a debtor has an insurance in the life of a lender
if an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to
charge a higher premium
Something of value exchanged between the insurer and the insured is considered an
consideration
purpose of conditional receipt
coverage will be effective either on the date of the application or the date of the medical exam
under the Fair Credit Reporting Act, individuals rejected fro insurance due to information contained in a consumer report must be
informed of the source of the report
Stranger-Originated Life Insurance (STOLI) are in direct opposition to the principle of
insurable interest
under the fair credit reporting act, if the consumer challenges the accuracy of information contained in his or her report, the reporting agency must
respond to the consumers complaint
underwriting process
selection, classification, and rating of risks
elements of a legal contract
1. offer and acceptance 2. consideration 3. competent parties 4. legal purpose
The Federal Fair Credit Reporting Act regulates _________ _____________
Consumer reports
The medical information Bureau was created to protect
Insurance companies from adverse selection by high risk persons.
adverse selection
insuring of risks that are more prone to losses than average risk
which of the following is not true regarding a certificate of authority
it is issued to group insurance participants
if a policy includes a free-look period of atleast 10 days, the buyers guide may be delivered to the applicant
with the policy
Upon delivery, the producer may be required to obtain any of the following EXCEPT
signed waiver of premium
In insurance, an offer is usually made when
The completed application is submitted
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
Contract of Adhesion
the insured must accept the entire contract with all of its terms and conditions, take it or leave it
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
representations statement
statements believed to be true to the best of ones knowledge--opposite is a misrepresentation
when must insurable interest exist in a life insurance policy?
At the time of application
all of the following are requirements for life insurance illustrations EXCEPT -
They must be part of the contract.