Life insurance 1

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 A. Keep the premium and reject the rick on the basis that the applicant died before the policy could be issued B. Issue the policy anyway and pay the face value to the beneficiary. C. Negotiate a reduced settlement with the beneficiary due to the unusual circumstances involved. D. Return the premium to Y's estate, since it has no obligation to pay the death claim.

B. Issue the policy anyway and pay the face value to the beneficiary. The conditional receipt says the coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, as long as the applicant is found to be insurable as a standard risk, and policy is issued exactly as applied for.

The Fair Credit Reporting Act

Regulates what information may be collected and how the information may be used. Consumer Reports include written and/or oral information regarding a consumer's credit, character, reputation, and habits collected by a reporting agency from employment records, credit reports, and other public sources. Ancestry is not a relevant factor assessed in these reports.

Contract of Adhesion

A contract prepared by one party that must be accepted as written or be rejected by the other party. Favors insured

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied A. Material misrepresentation B. Waiver C. Utmost Good Faith D. Estoppel

A. Material misrepresentation A material misrepresentation will affect whether or not a policy is issued. If the insured had been truthful, it is very likely that the policy would not be issued

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? A. Representation B. Warranty C. Concealment D. Indemnity

B. Warranty. A warranty in insurance is a statement guaranteed to be true. When an applicant is applying for an insurance contract, the statements he or she makes are generally not warranties but representations.Representations are statements that are true to the best of the applicant's knowledge.

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? A. The examiner B. The applicant C. The insurer D. The cost of the examination will be waived

C. The insurer During the underwriting process, an insurer may require that an applicant receive a medical examination. The insurer is responsible for the associated costs of the examination.

The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What must the insurer do with the application A. Answer the missed questions for the applicant B. Acknowledge the missed question with a signature and continue the policy issue process C. Proceed with issuing a policy D. Return to the applicant for completion

D. Return to the applicant for completion

What is the purpose of a conditional receipt? A. It is given only to applicants who fully prepay the premium B. It is intended to provide coverage on a date prior to the policy issue. C. It guarantees that a policy will be issued in the amount applied for. D. It serves as proof that the applicant has been determined insurable

B. It is intended to provide coverage on a date prior to the policy issue. Coverage commences on the date of the application or the date of a medical examination, whichever is later, on the condition that the applicant is determined to be insurable at the rate applied for.

If an agent fails to obtain an applicant's signature on the application, the agent must A. Return the application to the applicant for a signature. B. Sign the application for the applicant. C. Sign the application, stating it was by the agent. D. Send the application to the insurer with a note explaining the absence of signature.

A. Return the application to the applicant for a signature All application must have the appropriate authorized signatures.

Unanswered questions on policy

Any unanswered questions need to be answered before the policy is issued. If a policy is issued with questions left unanswered, the contract will be interpreted as if the insurer waived its right to have an answer for the question, and will not be able to deny coverage later because of unanswered questions.

Conditional Contract

As the name implies, a conditional contract requires that certain conditions must be met by the policyowner and the company in order for the contract to be executed, and before each party fulfills its obligations. For example, the insured must pay the premium and provide proof of loss in order for the insurer to cover a claim.

If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's A. Prior insurance B. Ancestry C. Credit History D. Habits

B. Ancestry

Upon policy delivery, the producer may be required to obtain any of the following EXCEPT A. Delivery receipt B. Signed waiver of premium C. Statement of Good Health D. Payment of Premium

B. Signed wavier of premium The policy does not go into effect until the premium has been collected. If the premium was not collected at the time of the application, the producer may also be required to get a Statement of Good Health from the applicant at the time of policy delivery. Waiver premium is a rider that can be added to a life insurance policy, and not something to be obtained from the applicant.

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? A. The customer has no knowledge of this action B. The customer's associated, friends, and neighbors provide the report's data C. They provide additional information from an outside source about particular risk D. They provide information about a customer's character and reputation

B. The customer's associates, friends, and neighbors provide the report's data

An insurance contract must contain all of the following to be considered legally binding EXCEPT A. Consideration. B. Competent parties. C. Beneficiary's consent. D. Offer and acceptance

C. Beneficiary's consent The four essential elements of all legal contracts are offer and acceptance, consideration, competent parties, and legal purpose.

Which of the following is a risk classification used by underwriter for life insurance? A. Normal B. Excellent C. Standard D Poor

C. Standard The three ratings classifications that denote the risk level of insureds are standard, substandard, and preferred. This classification system helps insurers to decide if an insured should pay a higher premium.

If a policy includes a free-loo period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than A. Prior to filling out an application for insurance. B. With the policy. C. Upon issuance of the policy. D. Within 30 days after the first premium payment was collected.

B. With the policy If a life insurance policy contains a free-look period of at least 10 days, the buyer's guide can be delivered with the policy. If it doesn't, the buyer's guide must be delivered prior to accepting the initial premium.

Elements of a Legal Contract

1. Agreement-offer and acceptance 2. Consideration 3. Competent parties 4. Legal purpose

Another name for a substandard risk classification is A. Declined B. Elevated C. Rated D. Controlled

C. Rated Substandard risk classification is also referred to as "rated" since these policies could be issued with the premium rated-up, resulting in higher premium.

The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract? A. Adhesion B. Personal C. Unilateral D. Conditional

D. Conditional A conditional contract requires both the insurer and policy owner to meet certain conditions before the contact can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policyowner.

Aleatory Contract

Exchange of unequal amounts or values

Which of the following would provide an underwriter with information concerning an applicant's health history? A. A medical examination B. The agent's report C. The inspection report D. The Medical Information Bureau

D. The Medical Information Bureau An agent's report and inspection report provide personal information. Medical exams provide information on current health. Only the MIB will provide information about an applicant's medical history.

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? A. Aleatory B. Unilateral C. Conditional D. Contingent

C. Conditional

Which of the following insurers are owned by stockholders? A. Reciprocal B. Fraternal C. Stock D. Mutual

C. Stock Only stock insurance companies are owned and controlled by stockholders.

Why should the producer personally deliver the policy when the first premium has already been paid? A. To find out how the family has been doing since the initial presentation B. To make sure the policy is not stolen or lost C. To help the insured understand all aspects of the contract D. To ensure the producer gets paid commission

C. To help the insured understand all aspects of the contract It is the producer's responsibility to make sure that the policy is understood by the insured and all of their questions are satisfied, and the delivery receipt is signed.

An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin? A. On the designated effective date B. On the application date C. When the agent submits the application to the company and the company issues a conditional receipt D. When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health

D.When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health If the initial premium is not paid with the application, the agent will be required to collect the premium at the time of policy delivery. In this case, the applicant will most likely need to fill out a Statement of Good Health

If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE? A. The policy will be void. B The insurer may deny coverage later, because of the information missing on the application C. The policy will be interpreted as if the insurer waived its right to have an answer on the application D. The policy will be interpreted as if the insured did not have an answer to the question.

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