Insurance pt. 1

Insurable interest and consent

A life insurance policy has a legal purpose if both of which of the following elements exist?

Pay the policy proceeds only if it would have issued the policy

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will

Disputes regarding consumer report information

According to the Fair Credit Act, all of the following would be considered negative information about a consumer EXCEPT

Change any incorrect statement on the application y personally initialing next to the corrected statement

All of the following are duties and responsibilities of producers at the time of application EXCEPT

They must be part of the contract

All of the following are requirements for life insurance illustrations EXCEPT

Fair Credit Reporting Act

An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company?

The date of medical exam

An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?

Conditional

An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe?

Consideration

An insurer neglect to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?

Inspection report

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that?

A STOLI policy

An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of

Rated

Another name for a substandard risk classification is

Contracts of adhesion

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as

5 days

If a consumer request additional information concerning an investigative consumer report, how long does the insurer or

Whether an insurable interest exists between the individuals

If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about

Charge a higher premium

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to

The policy will be interpreted as if the insurer waived its right to have an answer on the application

If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE?

The insurer

If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination?

Applicant's past income

In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT

The customer's associated, friend, and neighbors provide the report's data

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?

When an insurer's underwriting approves coverage

In forming an insurance contract, when does acceptance usually occur?

Unilateral

In insurance policies, the insured is not legally to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?

An applicant submits an application to the insurer

In insurance, an offer is usually made when

It will be likely higher because the applicant is a substandard risk

In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium?

Adhesion

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?

Gross premium

Mortality - Interest +Expense=

Insurable intrest

Stranger-originated life insurance policies are in direct opposition to the principle of

Regulates consumer reports

The Federal Fair Credit Reporting Act

Protect private customer information filed with a financial institution

The Gramm-Leach-Bililey Act was passed to

Expenses

The factor added to the net premium to cover the costs of the insurer in obtaining and maintaining the business is called

As of the application date

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?

A presentation of non guaranteed elements of a policy

The term "illustration" in a life insurance policy refers to

Respond to the consumer's complaint

Under the Fair Credit Reporting Act, if a consumer challenges the accuracy of the information contained in a consumer or investigative report, the reporting agency must

Must be informed of the source of the report

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report

Material misrepresentatoin

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called

Signed waiver of premium

Upon policy delivery, the producer may be required to obtain any of the following EXCEPT

Insurance

What do individuals use to transfer their risk of loss to a larger group?

One-sided: only one party makes an enforceable promise

What is a definition of a unilateral contract?

A statement by the applicant that, upon delivery, would affect the underwriting decision of the insurance company

What is a material misrepresentation?

It is intended to provide coverage on a date prior to the policy issue

What is the purpose of a conditional receipt?

To explain features and benefits of a proposed policy to the consumer

What is the purpose of a disclosure statement in life insurance policies?

To allow the consumer to compare the costs of different policies

What is the purpose of the buyer's guide?

Issue the policy anyway and pay the face value to the beneficiary

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will

Consideration

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

Application

When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information?

When the application is signed and a check is given to the agent

When is the earliest a policy may go into effect?

At the time of application

When must insurable interest exist in a life insurance policy?

If it is intentional and material

When would a misrepresentation on the insurance application be considered fraud?

Their premiums are lower

Which is generally true regarding insureds who have been classified as preferred risk?

Application

Which is the primary source of information used for insurance underwriting?

Annual cost of mortality plus expenses

Which of the following best describes gross annual premium?

It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance

Which of the following best describes the MIB?

Exchange of unequal values

Which of the following best describes the aleatory nature of an insurance contract?

Aleatory

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?

Selection, classification, and rating of risk

Which of the following best details the underwriting process for life insurance?

Consumer report

Which of the following includes information regarding a person's credit, character, reputation, and habits?

Policyowner

Which of the following individuals must have insurable interest in the insured?

Debtor in the life of the creditor

Which of the following is NOT an example of a valid insurable interest?

The application given to a prospective insured

Which of the following is NOT the consideration in a policy?

Buyer's Guide

Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process?

Standard

Which of the following is a risk classification used by underwriters for life insurance?

Application

Which of the following is the basic source of information used by the company in the risk selection process?

The Fair Credit Reporting Act

Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?

Consumer report

Which of the following reports will provide the underwriter with the information about an insurance applicant's credit?

A debtor has an insurable interest in the life of a lender

Which of the following statements is NOT true concerning insurable interest as it applied to life insurance?

Standard risk is representative of the majority of people

Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles?

Substandard risk

Which of the following types of risk will result in the highest premium?

Premium amounts and surrender values

Which of the following will be included in a policy summary?

The Medical Information Bureau

Which of the following would provide an underwriter with information concerning an applicant's health history?

Insurers

Who makes up the Medical Information Bureau?

The producer

Whose responsibility is it to make certain that an application for insurance is filled out completely and correctly?

To help the insured understand all aspects of the contract

Why should the producer personally delver the policy when the first premium has already been paid?