CIC, CHAPTER 6, WORKBOOK

1. Which of the following is not one of four general purposes of signing documents? a) Efficiency and logistics b) Ceremony c) Evidence d) Reinsurance

(d) Reinsurance is a tool that is used to share or transfer insured risks

12. Which of the following statements about premium rates is correct? a) Most insurers establish upper age limits under which they will not issue life insurance. b) Age is not an important factor in assessing risk. c) Insurers charge preferred premium rates based on a table rating, charging a flat premium, or combining these methods. d) If the applicant is assessed as a sub-standard risk, the insurer may decline the application altogether.

12. (d)

10. True or false - The insurer limits the use of inspection reports, based on the age of the proposed insured and the amount of coverage requested. _______

10. True

11. Life insurance companies have established guidelines that underwriters can apply to assess the applicant's ability to pay premiums. The two methods include ____________ and ______________ .

11. factor tables; percentage-of-income rule

13. The basis of each province's legislation (excluding Québec) pertaining to life insurance is the ______________________

13. Uniform Life Insurance Act

14. The provincial life insurance acts specify that if a contract lapses, the policyowner can apply for reinstatement within two years after the date it lapsed. The policyowner must pay the overdue premium and any other money owing under the policy, together with interest at a rate specified in the contract that may not exceed ________ % compounded annually.

14. 6% See Chapter 2 under reinstatement.

15. Which of the following is not a settlement option for a life insurance contract? a) paid-up option b) interest option c) life income option d) fixed-amount option

15. (a) See Chapter 2 under settlement options.

16. True or false - According to provincial insurance acts, the application forms part of the insurance contract. _______

16. True

17. True or false - An unexpected death or injury from an intentional act would be covered under an accidental means clause. _______

17. False. An accidental means clause requires that not only the results, but also the means, causing an accident must be accidental.

18. Based on the information listed below, what amount of residual disability benefit would the insured be entitled to? - Insured's prior earnings were $6,000 per month - Earnings post-disability are $2,400 per month - Monthly disability benefit is $1,200 a) $3,600 b) $720 c) $480 d) $2,160

18. (b) See Chapter 3 under residual disability benefits. As the monthly disability benefit is $1,200, the insured would be entitled to a residual benefit of $720 ($1,200 x 60%). Loss of earnings is 60% (decline from $6,000 per month to $2,400 per month).

19. Which of the following statements regarding the claims process for life insurance is correct? a) The insurer must comply with a valid claim by making the claim payment within 60 days. b) The insurer may refuse to pay a claim until it has received absolute proof of the insured's death. c) A claimant can apply for benefits if the person whose life is insured has disappeared and has not been heard from for 17 years. d) The insurer can within 10 years of the issue date void a policy it would never have issued if it had known the life insured's true age.

19. (b)

20. True or false - With disability insurance, once the insurer is satisfied that a valid claim exists, it is up to the claims examiner to begin administering disability payments. The examiner will begin making monthly benefit payments at the end of the first month that payments are due. ________

20. True

21. With accident and sickness insurance, the claimant is obliged to notify the insurer in writing no more than ____________ days after the accident occurs. Proof of claim must be submitted to the insurer within ____________ days.

21. 30; 90

22. In pricing a life insurance product, which of the following statements is incorrect? a) Insurers quote premium rates based on $100 increments of insurance. b) The reliability of mortality tables is based on the Law of Large Numbers. c) Morbidity tables contain statistics on the likelihood of individuals becoming disabled. d) Commissions are usually based on a percentage of the premium payable for each policy that an agent sells.

22. (a) Insurers quote premium rates based on $1,000 of insurance.

23. Which of the following statements regarding pricing and reinsurance is correct? a) An override is an amount calculated by an insurer to provide for commissions, expenses and taxes. b) Retrocession means a reinsurance company may agree to assume all the risk or assume only some of the risk and cede a portion to other reinsurance companies. c) The gross premium charged to the policyowner is the net premium less the "loading" amount. d) In "shopping a case", a reinsurance company reviews the underwriting documentation and either declines the risk or offers to insure the risk at a lower-than-standard premium rate.

23. (b)

3. An agent must send a copy of a replacement disclosure form, signed by the applicant, to the original insurer within _________________ working days of taking the application.

3. three

4. Questions asked in the application regarding family history relate to _________________ parents and siblings.

4. biological

5. Insurers who receive a premium payment with an application may issue a ______________ or a _________________ .

5. temporary insurance agreement; conditional insurance receipt

6. True or false - Conditional insurance receipts provide insurance coverage for a specific amount and for a specific period of time.

6. False. A temporary insurance agreement provides coverage for a specific amount and period of time.

7. Which of the following statements regarding the underwriting process is incorrect? a) The underwriting process begins when the insurance application is received by the insurer. b) The insurer has to make sure that the agent who submitted the application has a national licence. c) Most insurance companies operate a jet underwriting unit. d) The applicant must have an insurable interest in the life to be insured, otherwise an insurance policy cannot be issued.

7. (b) Once the application is received by the underwriting office, the first step in processing the application is to make sure the agent who signed and submitted the application is licensed by the province in which the application was completed.

8. An applicant's participation in hazardous activities may cause the underwriter to do any of the following EXCEPT: a) Decline the application b) Charge an extra premium c) Provide temporary coverage only, through a Temporary Insurance Agreement d) Exclude coverage for death occurring as a result of the applicant's participation in these activities.

8. (c)

9. An Attending Physician's Statement can be used by an underwriter to confirm health information. However, ordering this report can significantly delay the underwriting process. Identify TWO circumstances where this report is ordered. i) ii)

9. Circumstances include: when a specific illness or injury has been mentioned on the application; the amount of insurance applied for is beyond a certain limit; information from the MIB is unfavourable; the proposed life insured is elderly.

2.* True or false* - If the estate is designated as the beneficiary of a life insurance policy, policy proceeds will be subject to probate fees and may be subject to the claims of creditors of the deceased.

True