Chapter 8 - Health Insurance Basics

In the event a policy is delivered by an agent to the insured, and the premium payment is to be collected at the time of this delivery, normally what else must the agent obtain to make the delivery complete? A) A statement of good health B) Postage and handling fees C) An affidavit from the applicant D) Additional payment reflecting lost interest

A) A statement of good health

An application for health insurance includes all of the following information, except: A) Attending physician's statement B) The applicant's age, gender, date of birth, and occupation C) Medical status of immediate family members D) Past and present health conditions

A) Attending physician's statement

All of the following are sources that insurers may look at for information regarding the insurability of a prospective insured, except: A) College Degree B) APS (Attending Physician Statement) C) MIB (Medical Information Bureau) D) Inspection Report

A) College Degree

If questions are incomplete on an application and the insurer issues the policy, a claim is: A) Covered since the insurer issued the contract based on an incomplete application B) Covered only after the first 2 years C) Not covered and the policy is canceled due to fraud D) Not covered if discovered during the Incontestability period

A) Covered since the insurer issued the contract based on an incomplete application

When it comes to health insurance underwriting and HIV/AIDS, which statement is TRUE? A) Insurers can refuse to issue a policy based on HIV test results B) All health insurance applicants must be tested for HIV C) Refusing to be tested for HIV cannot be the reason for denial of coverage D) Insurers cannot require an HIV test in order to consider an application

A) Insurers can refuse to issue a policy based on HIV test results

A medical or physical exam requested by the underwriter to determine insurability: A) Is performed by a licensed professional and includes checking vital statistics and routine lab work B) Includes a written statement by the applicant's primary care physician explaining the treatment for a preexisting condition C) Requires notification of information practices and written consent under the FCRA D) Is paid for by the applicant up front and reimbursed by the insurance company once the policy is issued

A) Is performed by a licensed professional and included checking vital statistics and routine lab work

All of the following statements regarding an insurance application are correct, except: A) It is not included as part of the contract B) It is a formal written request by an applicant to an insurer requesting a policy C) It is the primary source of information for underwriting purposes D) It must be signed by at least the applicant and producer

A) It is not included as part of the contract

Which of the following must be given to consumers under the provisions of the Fair Credit Reporting Act (FCRA)? A) Notice of Information Practices B) Disclosure at the Point of Sale C) Outline of Coverage D) Application Receipts

A) Notice of Information Practices

A medical condition that was treated prior to the effective date of a policy is a: A) Pre-existing Condition B) Probationary Condition C) Surgical Condition D) Prescribed Condition

A) Pre-existing Condition

Which of the following are included in Part II of a Health Insurance Application? A) Present health and medical background of applicant and family B) Marital status C) Occupation D) Address

A) Present health and medical background of applicant and family

Which of the following has primary responsibility for ensuring that the application is filled out completely? A) Producer B) Home office underwriter C) Actuary D) Insurer

A) Producer

Consumers must be made aware of all of the following in a replacement sale, except: A) The financial ratings from each rating service B) There may be a waiting period for pre-existing conditions C) The new policy may have a higher premium D) The new policy may be offered with lower benefits, limitations, or exclusions of coverage

A) The financial ratings from each rating service

If an application is submitted with a question left unanswered, which of the following should occur? A) The insurer would require an answer before issuing a policy B) The insurer would deny the application C) The insurer would waive the question D) The insurer would require an answer when a claim occurred

A) The insurer would require an answer before issuing a policy

If a premium was not submitted with the application, the producer must deliver the policy, explain the benefits, and collect the premium. The issued policy is the Offer and the premium becomes the: A) Delivery B) Acceptance C) Trial D) Evidence

B) Acceptance

Other than the applicant, which signature is required on an application? A) Executive officer of the insurer B) Agent C) Beneficiary D) Insurance commissioner

B) Agent

All of the following are examples of insurable interest between the insured and policyowner, except: A) Husband/wife B) College roommates C) Business partners D) Creditor/debtor

B) College roommates

If the insurer issues a policy after receiving an application for health insurance in which questions regarding preexisting conditions were left blank, what would be the consequence to the insured's coverage if a preexisting condition caused a claim shortly after the policy was issued? A) The policy would be reissued B) Coverage would be as stipulated in the policy because the company issued the policy even though the question was left blank C) The policy would be sent back to underwriting for approval D) The policy would be cancelled

B) Coverage would be as stipulated in the policy because the company issued the policy even though the question was left blank

Which of the following would be considered a pre-existing condition? A) A broken wrist B) Diabetes C) A sore throat D) The flu

B) Diabetes

Field underwriting is very important: A) Due to the risk of morale hazard B) Due to the risk of a moral hazard C) For individual insurance only D) For policies that do not require home office underwriting

B) Due to the risk of a moral hazard

The _________ was created in order to alert insurer home office underwriters of errors, omissions, or misrepresentations made on insurance applications. A) Consumer Investigative Report B) MIB C) Attending Physician's Statement D) The agent's report

B) MIB

Howard talks to his agent Jane about buying a critical illness policy from the XYZ insurance company to cover his wife Deborah, and naming his daughter Mary as the beneficiary in case of death. Jane told him that she would need signatures from all of the following, except: A) Howard B) Mary C) Jane D) Deborah

B) Mary

If a premium was not paid at the time of application and a policy is issued, all the following are responsibilities of the agent/producer, except: A) Explain the policy benefits, provisions, riders and exclusions B) Pay the first premium C) Hand-deliver the policy to the insured D) Obtain a signed Statement of Good Health

B) Pay the first premium

The __________ is the person applying for insurance coverage and is responsible for completing an application. A) Insurer B) Policyowner C) Insured D) Producer

B) Policyowner

Accidental Injury is a: A) Predictable event B) Sudden, unexpected and unforeseen event C) Pre-existing condition D) Catastrophic loss

B) Sudden, unexpected and unforeseen event

What is the primary source of underwriting information for an individual health insurance policy? A) The agent's report B) The application C) A medical exam D) The inspection report

B) The application

G applies for a policy as a standard risk after paying the initial premium. After thorough underwriting, the insurer issues the policy as a substandard risk. The issued policy represents: A) Constructive delivery B) The insurer's counteroffer C) The insurer's acceptance D) A legal contract

B) The insurer's counteroffer

An applicant for accident and health insurance works two jobs. Which of the applicant's jobs will be used to underwrite the policy? A) The least hazardous of the two B) The most hazardous of the two C) The one with the most hours per week D) The job in which the applicant has the most experience

B) The most hazardous of the two

The agent's primary underwriting role is: A) No longer applicable in most situations B) To make sure the application provides the proper information C) To collect information for marketing purposes D) To determine insurability

B) To make sure the application provides the proper information

Accident and Health policies provide coverages for all, except: A) Medical expenses B) Workers' Compensation claims C) Accidental death and dismemberment D) Dental expenses

B) Workers' Compensation claims

Accident and Health Insurance provides coverage for two major categories of perils. They are: A) On the job and off the job B) Driving under the influence and driving while intoxicated C) Accidental injury and sickness D) Automobile and home health care

C) Accidental injury and sickness

Which of the following statements is correct regarding changes in the application? A) All changes must be notarized B) The insurer will provide specific instructions as to what changes on the application the producer can make C) Any change or correction must be initialed by the applicant D) A licensed producer is authorized to make any reasonable changes to the application

C) Any change or correction must be initialed by the applicant

A premium is paid at the time of application and a conditional receipt is issued. If the policy is issued as applied for, and assuming a medical exam has already been completed, coverage becomes effective: A) After the free look expires B) At the time the policy is issued C) At the date of application D) Upon policy delivery

C) At the date of application

Edward applies for a disability insurance policy. He pays the initial premium at the time of application and receives a conditional receipt. Three days after the insurance company conducts a medical examination, but before it issues a policy, Edward suffers a stroke. Upon reviewing the results of his medical exam, the company discovers that Edward has been diagnosed with high blood pressure and atherosclerosis. Under the terms of the conditional receipt, the insurance company: A) Pays a reduced benefit since the results of the medical exam show a pre-existing condition B) Pays the claim because a receipt has been provided C) Denies the claim because the insurer would not have issued the policy as applied for as standard or better D) Delays the effective date of the policy

C) Denies the claim because the insurer would not have issued the policy as applied for as standard or better

An application for health insurance was submitted on May 1 without a premium payment. The underwriter ordered a medical exam, which was completed on May 15. The company issued and mailed the policy to the agent on May 30. The agent delivered the policy and collected the first premium, along with the Statement of Good Health, on June 3. Coverage became effective on: A) May 30 B) May 15 C) June 3 D) May 1

C) June 3

Producer W filled out an application on client X. Before submitting the application to the insurer, W notices that there was one question left unanswered and another one was answered incorrectly based on the information provided. Since X lives over an hour away from the office, W should do which of the following? A) As a licensed professional, W can answer the question and correct any mistakes on behalf of X B) Immediately submit the application as is written and hope that the home office does not notice C) Make arrangements to meet X in-person to obtain the missing information and correct the incorrect response D) W can make these necessary administrative changes with X's verbal consent

C) Make arrangements to meet X in-person to obtain the missing information and correct the incorrect response

What factors are not used in underwriting an individual disability policy? A) Health history and foreign travel B) Age and gender C) Political affiliation and religious preference D) Smoking and hobbies

C) Political affiliation and religious preference

The specified period that must elapse before new coverage is effective for nonaccidental losses is known as which of the following? A) Waiting period B) Exclusion C) Probationary period D) Morbidity table

C) Probationary period

Statements made on the application are considered true to the best of the applicant's knowledge and belief are considered to be: A) Warranties B) Waivers C) Representations D) Concealments

C) Representations

If the premium is paid at the time of application, the agent will provide the applicant with a: A) Statement of good health B) Free look notice C) Claim form D) Conditional receipt

D) Conditional receipt

A producer gathers information about the applicant for the insurer in order to avoid adverse selection. This is considered to be: A) Application process B) Principle of indemnity C) Law of large numbers D) Field underwriting

D) Field underwriting

____________ is the initial step of the total process of insuring a health risk. A) The sales presentation B) Collecting the premium payment C) Completing medical exams D) Field underwriting

D) Field underwriting

Which of the following documents used for underwriting can be completed by talking to the proposed insured over the phone? A) APS B) MIB C) Agent's report D) Inspection report

D) Inspection report

After K completed an application for health insurance, a paramedical scheduled an appointment to check height, weight, blood pressure, and collect blood and urine samples. This is an example of which source of underwriting? A) Attending Physician's Statement B) Completing the application C) Medical Information Bureau D) Medical exam

D) Medical exam

Which of the following is not considered an underwriting factor when determining insurability for health insurance? A) Hazardous hobbies B) Type of policy being applied for C) Medical background D) Spouse's occupation

D) Spouse's occupation

Regarding HIPAA disclosures and privacy rules, before an insurer can share any medical information, the applicant must be notified of all the following, except: A) Opportunity to refuse the dissemination of information B) Treatment of individually identifiable health information C) Rights to maintain privacy D) The insurer has the right to share identifiable health information with the agent

D) The insurer has the right to share identifiable health information with the agent

possibility that an applicant might, for his or her own benefit, provide information that does not accurately reflect the level of risk

moral hazard

refers to indifferent attitude toward being involved in risky behavior while coverage is in force

morale hazard

statements made and believed to be true to the best of a person's knowledge

representations

What do underwriters look at for information regarding insurability for a prospective insured?

application, credit and inspection reports, MIB data, APS, medical exams and test results, and supplemental questionnaires

requested by the underwriter if the applicant has a preexisting condition that needs further explanation

attending physician's statement

What information is included in the health insurance application?

date of birth, gender, residence, marital status, and occupation, past and present health conditions, recent medical visits, procedures, hospitalizations or surgeries, and medical status of immediate family members

an interview with the applicant to confirm and elaborate information submitted on the application

inspection report

statements of absolute truth

warranties