Life Insurance Chapter 1

Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives?

Medical Information

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

must be informed of the source of the report

In addition to an attending physicians report the underwriter will usually request a

Medical Information Bureau report

What describes the specific information about a policy?

Policy summary

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

Premium amounts and surrender values

Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a

Premium receipt.

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?

The date of medical exam

Underwriting is

The process of reviewing applications for coverage and the information contained on the application. Also the risk selection process

Which employees of an insurance company are responsible for the final risk selection?

Underwriters

when is the earliest a policy may go into effect

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

Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years?

a policy summary

what are the four required elements of an insurance contract

agreement, consideration, competent parties, legal purpose

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

applicants past income

representations

are statements believed to be true to the best of one's knowledge, but are not guaranteed to be true

when must insurable interest exist in life insurance?

at the time of application

representations are statements

believed to be true

Insurable interest is not required of

beneficiaries

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?

buyer's guide

No premium No _____________

coverage

If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT

erase the incorrect answer and record the correct answer

If material misrepresentations are intentional they are considered

fraud

The policy owner must have __________ ________ in the life of the insured

insurable interest

An ________ _______ is the key source underwriters use for information about the applicant

insurance application

who makes up the MIB

insurers

warranty

is an absolute true statement upon which the validity of the insurance policy depends.

under the pair credit reporting act, individuals rejected for insurance due to information contained in a consumer report

must be informed of the source of the report

The conditional receipt says that coverage will be effective either

on the date of the application OR the date of the medical exam... WHICHEVER IS LATER

Underwriter may request a medical examination of the insured.. There are two option

paramedical report and Attending Physician's Statement (APS)

what 2 parts make up a life insurance application

part 1 general info, part 2 medical information

The higher the risk, the higher the _______

premium

Part 1 of the application includes

questions regarding current coverage

Another name for a substandard risk classification is

rated

insured statements on the application are

representations

Insurance is the transfer of

risk

what are the three main factors that are used in premium determination?

risk (mortality rate of death within a specific group), interest and expense

What are the three rating classifications that denote the risk level of insureds?

standard, substandard, and preferred. This system helps decide if an insured should pay a higher premium

the PREFERRED RISK category is reserved for those persons with...

superior physical condition,lifestyle, and habits

Conditional receipt means

the applicant may be covered as early as the date of the application

What entity established the Do-Not-Call registry

the federal trade commission

The responsibility of making certain that an application for insurance is filled out completely, correctly, and to the best of his or her knowledge is the responsibility of whom?

the producer

Insurable interest must exist at

the time of application, but not necessarily at the time of a claim.

what is the purpose of the buyers guide?

to allow the consumer to compare the costs of different policies

what is the purpose of a disclosure statement in life insurance

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 explain features and benefits of a proposed policy to the consumer

The purpose of underwriting is

to protect the insurer against adverse selection (risks which are more likely to suffer a loss)

Insurers CANNOT refuse coverage solely on the basis of adverse information on an MIB report

true

misrepresentations

untrue statements on the application that could void the contract

If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant

with the policy

If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?

5 days

Permissible calling hours for telemarketers are between ___ and ____

8am-9pm

Investigative Consumer Report

A report similar to consumer report, but one that also provides information on the consumer's character, reputation and habits.

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

A)Solicitation, negotiation and sale of policies B)Issuance of policies C)Reporting and rejection of risks D)Selection, classification, and rating of risks

Medical Information Bureau (MIB)

An information database that stores the health histories of individuals who have applied for insurance in the past. Most insurance companies subscribe to this database for underwriting purposes.

Consumer Reports

Include written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.

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?

Inspection Report

The Medical Information Bureau (MIB) was created to protect

Insurance companies from adverse selection by high risk persons.

describe the MIB

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

What is a material misrepresentation?

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

which of the following reports will provide the underwrite with information about an insurance applicants credit?

A) Agents report B) Any federal report C) consumer report D) Inspection report

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?

A)$2,500 B)$1,000 C)$100 per violation D)Revocation of license

An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?

A)Application B)Interviews C)State records D)Medical records

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)Credit history. B)Habits. C)Prior insurance. D)Ancestry.

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

A)Debtor in creditor B)Business partners in each other C)Employer in employee D)Child in parent

Underwriters review applications for insurance and the information contained therein so as to NOT

A)Protect the insurer against adverse selection. B)Classify an applicant as to type and degree of risk. C)Assign the appropriate rate. D)Issue a policy that would insure a pending loss.

The Federal Fair Credit Reporting Act

A)Protects customer privacy. B)Regulates telemarketing. C)Prevents money laundering. D)Regulates consumer reports.

Part 2 (health question) of the application for life insurance provides questions regarding all of the following EXCEPT

A)Recent surgeries. B)Other insurance coverages. C)Family health history. D)Alcohol and tobacco consumption.

As a field underwriter, a producer is responsible for all of the following tasks EXCEPT

A)Solicit business that will fall within the insurer's underwriting guidelines. B)Obtain appropriate signatures on the application for insurance. C)Issue the policy that is requested. D)Help prevent adverse selection. the producer does not issue the policy but delivers it

An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant dies the following day, which of the following is TRUE?

A)The death claim will be rejected. B)The application will be voided. C)The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy. D)The premium would be returned to the insured's estate because the policy was not issued.

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

A)The type of policy requested. B)Which individual will pay the premium. C)Whether an insurable interest exists between the individuals. D)The gender of the applicant.

All of the following are requirements for life insurance illustrations EXCEPT

A)They must be part of the contract. B)They may only be used as approved. C)They must identify nonguaranteed values. D)They must differentiate between guaranteed and projected amounts.

what is the primary difference between consumer report and investigative consumer report

For an investigative consumer report the information is obtained through an investigative and interviews with associates, friends, and neighbors of the consumer. The report CANNOT be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested. The insurer then has 5 days to provie

What is the purpose of a conditional receipt?

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