Insurance - Chapter 2

At what age may a minor purchase a life or health insurance contract?

15

A life insurance application can usually be backdated for a maximum of how many months?

6 months

Which of the following does not demonstrate constructive delivery?

A conditional receipt is issued to the applicant

Which of the following is the primary source of information used in underwriting an insurance policy?

Application

Why are life and health insurance contracts said to be contracts of adhesion?

Because the insurer writes the contract, to which the insured must adhere.

Benefits under a medical expense policy are provided through which of the following methods?

Cash Payment

Which of the following is not a primary component of an insurance contract?

Components of Insurance Contract - Policy Face - Insuring Clause - Conditions - Exclusions Answer: Aleatory contract

Insurance policies are based on:

Contract Law

Janice applies for a life insurance policy. She submits the application with the initial premium for $100,000 whole life. The agent returns the policy with a higher premium and hazardous occupation exclusion. What has the insurer made?

Counter-offer

The __________ section of the contract states what the insurer will not do. This includes the risks that the insurer will not cover.

Exclusions

Which of the following statements about a temporary insurance agreement is CORRECT?

It provides temporary coverage until an application is rejected or the policy is issued.

In Ray's application for life insurance an applicant failed to complete one part regarding family history. In his statement, the agent described the family as long-lived and healthy. If an insurance company accepts the application in the incomplete form and the applicant for coverage dies young from a cardiac condition that had taken the lives of both his parents before age 50, will the company deny or accept the claim of the beneficiaries?

It will pay the claim, because in accepting the application, it waived its right to the missing information.

Rates for insurance policies are based on:

Sex and age

Who administers the National Do Not Call Registry?

The Federal Trade Commission

If a company issues a conditional receipt to an applicant who has paid an initial premium for a policy that does not require a medical examination:

The applicant is immediately covered.

All of the following are involved in the collection of an applicant's medical history, EXCEPT:

The consumer report

John purchases a life insurance policy for his wife Jean. Which of the following best describes who is legally bound to the policy's promise of benefits?

The insurer

Insurance agent Margaret receives life insurance applications from Tim and Tom, who are identical twins, and are each applying for the exact same type of policy with the same face amount. The insurance company issues the policies as applied for, but charges Tom a 15% higher premium. Which of the following best explains the higher premium charged to Tom?

Tom's risk classification

This employee of the insurer assigns risk categories to applicants:

Underwriter

Which of the following best describes the process used to select and classify risks?

Underwriting

The agent must provide the buyer's guide to the applicant:

When the policy is delivered

Coverage is effective:

With collection of the initial premium, approval of the application, policy issuance and delivery

Telemarketers may call phone numbers not on the Do Not Call List from:

8am to 9pm

Gerald has a chronic medical condition. What will his risk classification be? How will his premium be affected?

Gerald's risk classification will be substandard. His premium will be higher.

All of the following are required components of a legal contract, EXCEPT:

Invitation to offer

Part II of the life insurance application includes:

Medical Information

Field underwriting ________ adverse selection.

Reduces

What are the basic elements of a legal contract?

Legal contract - Offer and Acceptance - Consideration - Competent Parties - Legal Purpose

All of the following statements are true regarding insurance application procedures, EXCEPT:

Producers can fill in any missing information they discover on the application.

Alexander's life insurance policy is rated. Of the following, who must explain the reason for the premium increase to Alexander?

The agent

Which of the following best describes the MIB?

Nonprofit trade organization that supplies insurability information to member companies

If required by the insurer, the statement of good health must be collected by the producer at the time of:

Policy delivery

Which of the following best describes a life insurance policy in which the proposed insured is not required to undergo a medical examination?

Simplified Issue

An individual signed an application for a $100,000 life insurance policy and paid the first premium on January 1. The agent issued an insurability receipt. A week later, the required medical examination proves the person insurable. If the person dies before the insurer approves the application:

The coverage will be retroactively effective.