Chapter 5 - Life Insurance Underwriting and Policy Issue

On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take? - Collect initial premium along with a signed health statement - collect initial premium - explain to applicant the policy is no longer in effect due to change in health condition - collect initial premium and leave a binding receipt

- Collect initial premium along with a signed health statement

Which Federal law allows an insurer to obtain an inspection report on a potential insured? Medical Info Bureau Act Freedom of Info Act Fair Credit Reporting Act Medical Info Act

Fair Credit Reporting Act

Any changes made on an insurance application requires the initials of whom? insured agent applicant beneficiary

applicant

An applicant's medical information received from the Medical Information Bureau (MIB) may be furnished to the: - agent - applicant's spouse - National Association of Insurance Commissions (NAIC) - applicant's physician

- applicant's physician

A student pilot can pay regular premium costs for her life insurance policy with the addition of which of the following? - guaranteed insurability rider - aviation exclusion - impairment rider - accidental death and dismemberment

- aviation exclusion

K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective? - date the sales appointment was made - date the application was submitted to insurance company - date of application - date the agent delivered the policy, collected initial premium, and obtained a good health statement from the insured

- date the agent delivered the policy, collected initial premium, and obtained a good health statement from the insured

What is the purpose of the U.S.A Patriot act? - detect and deter fraud - detect and deter alien insurance companies - detect and deter terrorism - detect and deter misrepresentations

- detect and deter terrorism

From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant? - fair credit reporting act - medical info bureau - part 3 of application - life insurance buyer's guide

- fair credit reporting act

What action should I producer take if the initial premium is NOT submitted with the application? - keep the application until paid - forward application to insurer after giving applicant binding receipt - forward application to insurer without initial premium - forward application to insurer after giving applicant conditional receipt

- forward application to insurer without initial premium (policy wont become valid until paid)

What is being delivered during a policy delivery? - a binding receipt to the proposed insured - insurance contract to the proposed insured - application and initial premium to insurer - policy summary sheet and disclosure material to the proposed insurer

- insurance contract to the proposed insured

What is the purpose of a policy summary? - it details the commissions earned by the agent - it guarantees a policy will be issued - it allows the consumer to compare the costs of different policies - it highlights the critical parts of the policy issued

- it highlights the critical parts of the policy issued... AND describes coverage, riders, and exclusions

Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take? - deposit the applicant's check in his out and make a person check to the insurance company - return to the customer, collect a new check made out to insurance company and send new check to company - cross off his name on the "pay to" portion of the check and make it out to insurance company - deposit the check in to his personal account and use funds for a cashiers check and send that back to the company

- return to the customer, collect a new check made out to insurance company and send new check to company

P is a producer who notices 5 questions on a life application were not answered. What actions should P take? - mail incomplete application to applicant to be completed and returned to the agent - submit the application as-is to insurer - call the applicant and complete over the phone - set up a meeting with the applicant to answer the remaining questions

- set up a meeting with the applicant to answer the remaining questions

Upon delivery of a rated life insurance policy, the Producer must obtain each of the following EXCEPT: - signed HIPAA disclosure - signed amendment - signed statement of good health - the required premium

- signed HIPAA disclosure (taken at time of sale with applicant)

What would the Medical Information Bureau (MIB) identify? - testing positive for marijuana use from previous screening - existing life insurance coverage with other carriers - credit scores - primary physician

- testing positive for marijuana use from previous screening

Which of the following statements is CORRECT about an agent who is taking an insurance application? - the agent should avoid asking the applicant questions that may cause embarrassment - the agent should have the applicant initial any changes made on the application - the agent may allow a member of the applicant's immediate family to sign the application if the application is not available - the agent may answer routine questions on the application to the applicant

- the agent should have the applicant initial any changes made on the application

The reason for backdating a policy is: - to avoid being considered for substandard risk due to a recent cancer diagnosis - to obtain a premium rate based on an earlier age - to decrease face amount - to decrease the contestable period

- to obtain a premium rate based on an earlier age

When does a life insurance contract become effective if the initial premium is not collected during the application process? - after all medical and personal info has been evaluated - when the insurer receives initial premium from the producer - when producer delivers policy and collects initial premium - after the application has been approved by under writers

- when producer delivers policy and collects initial premium

An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective? - when policy is issued - the date of policy delivery - when the conditions of the receipt are met - the date the sales appointment was set

- when the conditions of the receipt are met

Which factors are taken into consideration when an insurance company determines the premium rate for a Whole Life Policy on an applicant? geographical location source of income risk classification marital status

risk classification