chapter 1: completing the application, underwriting, and delivering the policy.

The Medical information Bureau (MIB) was heated to protect A. Medical examiners that perform insurance physical examinations B. Insurance companies from adverse selection by high risk persons. C. insurance departments from lawsuits by policyowners D. insureds from unreasonable underwriting requirements by the insurance companies

B. Insurance companies from adverse selection by high risk persons. - The MIB makes information available to underwriters to assists them in the underwriting process. it is a nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals.

why should the director personally deliver the policy when the first premium has already been paid? A. to make sure the policy is not stolen or lost B. to help the insured understand all aspects of the contracts c. to ensure the producer gets paid commission d. to find out how the family has been doing since the initial presentation.

B. 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.

which of the following types of risk will result in the highest premium? A. Substandard risk B. standard risk C. preferred risk D. all risks pay equal premiums

A. Substandard risk - indicated that an individual represents an under- average insurance risk because of physical condition, personal or family history of disease, occupation, habits or hobbies. This rating incurs the highest premium if policy is issued.

when must insurable interest exist in a life insurance policy? A. when there is change of the beneficiary B.at the time of loss C. at the time of application D. at the time of policy delivery

C. at the time of application -in life insurance, insurable interest must exist at the time of application.

an underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering A. inspection report B. medical information bureau report C. medical examination D. attending physician statement

A. inspection report -an inspection report may be ordered about an applicant from an independent investigating firm or credit agency. it is general report of the applicant's finances, character, work, hobbies, and habits.

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 B. a notice regarding replacement C. a privacy notice D. a buyers guide

A. a policy summary -a policy summary usually includes all the listed information, and must be delivered along with a new policy.

which of the following is NOT the consideration in a policy? A. the application given to a prospective insured B. something of value exchanged between parties C. the premium amount paid at the time of application D. the promise to pay covered losses.

A. The appalication given to a prospective insured. -consideration Is something of value that is transferred between parties to form a legal contract.

which of the following is the basic source of information used by the company in the risk section process? A. consumer report B. application C. agent's report D. warranty

B. application -the application is the basic source of information an insurer uses in the risk selection process.

which of the following best describes the concept that the insured pays a small amount of premium for large amount of risk on the part of the insurance company? A. subrogation B. warranty C. Aleatory D. Adhesion

C. Aleatory -An insurance contract is an aleatory contract in that requires a relatively small amount of premium for large risk

which of the following is NOT an essential element of an insurance contract? A. consideration B. agreement C. legal purpose D. counteroffer

D. Counteroffer -in order for insurance contracts to be legally binding, they must have four essential elements: agreement (offer and acceptance), consideration, competent parties, and legal purpose. counteroffer is not required.

which of the following statements is correct about a standard risk class-action in the same age group and with similar lifestyles? A. standard risk pays a higher premium than a substandard risk B. standard risk requires extra rating C. standard risk is also known as a high exposure risk D. standard risk is representative of the majority of people

D. standard risk is representative of the majority of people - standard risks is representative of the majority of people in their age and with similar lifestyles. They are average risk.

which is the Appropriate action by the insurer if a prospective insured submitted an incomplete application? a. issue a policy anyway since the application has been submitted b. ask the producer who solicited the policy to complete and redesign the application c. fill in the blanks to the best of the insurer's knowledge d. return the application to the applicant for completion.

D. return the application to the applicant for completion -any unanswered questions need to be answered before the policy is issued. if the insurer receives incomplete applications, they need to be returned to the applicants for completion.

in insurance policies, the insured is not legally bound to any particularly action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. which contact element does this describe? A. unidirectional B. Aleatory C. conditional D. unilateral

D. unilateral -in a unilateral contract, the insured is not legally bound to do anything. the insurer =, however, must pay losses covered by the policy.

which of the following is NOT an example of insurable interest? A. employer in employee B. child in parent C. debtor in creditor D. business partners in each other

C. Debtor in creditor -The 3 recognized areas in which insurable interest exists are as follows: a Policyowner insuring hir/her own life, the life of a family member (relative or spouse), or the life of a business partner, key employee, or someone who has a financial obligation to them. A debtor does not have an insurable interest in the creditor. F

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. whether an unusable interest exists between the individuals B. The gender of the applicant C. The type of policy requested D. which individual will pay the premium

A. Whether an insurable interest exists between the individuals -insurable interest must exist at the time the policy is issued. some relationships are automatically presumed to qualify as an insurable interest, spouses, parents, children, and certain business relationships.

which of the following best describes the aleatory nature of an insurance contract? A. policies are submitted to the insurer on a take-it--or-leave-it basis B. exchange of unequal values C. only one of the parties being legally bound by the contract D. ambiguities are interpreted favor of the insured.

B. exchange of unequal values -an aleatory contract is a contract in which unequal amounts or values are exchanged. the amount of premium the insured pays is much less than the potential loss assumed by the insurer.

when would a misrepresentation on the insurance application be considered fraud? A. any misrepresentation is considered fraud B. if it is intentional and material C. never: statements by the applicant are only representations D. when the application is incomplete

B. if intentional and material -a misrepresentation. would be considered fraud if it is intentional and material, fraud would be grounds for voiding the contract.

Which of the following about the applicant is NOT included on part 1 of the application for insurance? A. occupation B. martial status C. medical background d. gender

C. medical background -part 1 only includes general questions about the applicant such as name, age, address,birthdate, gender, income, martial status, and occupation. only part 2 includes medical information.

the proposed insured makes the premium payment on a new insurance policy. if the insured should die, the insurer will ay 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 Policyowner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the Policyowner.

which of the following will be included in policy summary? A. Copies off illustrations and application B. comparisons with similar policies C. primary and secondary beneficiary designations D. premium amounts and surrender values

D. premium amounts and surrender values -must be delivered along with policy and will provide with producer's name and address, insurance company's home office address, the generic name of the policy issued, and premium, cash value, surrender value and death benefit figures for specific policy years.

A producer agent must do all of the following when delivering a new policy to the insured EXCEPT... A. explain the policy provisions, riders, and exclusions B. collect any premium due C. explain the rating procedures if the policy is rated differently than applied for D. Disclose commissions earned from the sale of the policy

D. disclose commissions earned from the sale of the policy -a producer must explain policy provisions, exclusions, and riders at the time of delivery, as well as the rating procedures, especially if the policy is rated differently than applied for. The producer must also collect any due premium and have the insured sign the statement of contingency used good health.

a prospective insured receives a conditional receipt but dies before the policy is issued. the insurer will... A. pay the policy proceeds up to an established limit. B. not pay the policy proceeds under any circumstances C. automatically pay the policy proceeds D. pay the policy proceeds only if it would have issued the policy.

D. pay the policy proceeds only if it would have issued the policy -the conditional receipt says that 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.

all of the following are requirements for life insurance illustrations EXCEPT A. they must differentiate between guaranteed and projected amounts B. they must be part of the contract C. they may only be sued as approved D. they must identify nonguaranteed values.

B. they must be part of the contract. -an illustration may not be altered by an agent and must clearly state that it is not part of the contract. it is legal to list non guaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed.

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 waiver 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 of premium is a rider that can be added to a life insurance policy, and not something to be obtained from the applicant.

which of the following is a risk classification used by underwriters for life insurance? A. excellent B. standard C.poor D. normal

B. standard -the 3 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.

Representations are written or oral statements made by the applicant that are..... A. found to be false after further investigation B. immaterial to the actual acceptability of the insurance contract C. considered true to the best of the applicant's knowledge D. guaranteed to be true

C. considered true to the best of the applicant's knowledge -Representations are statements made by the applicant that they believe to be true.

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 associates, friends, and neighbors provide the report's data. C. they provide additional information from an outside source about a 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. -Both consumer reports and investigative consumer reports provide additional information from an outside source about a customer's character and reputation, and both types of reports are sued under the Fair Credit Reporting Act. The main difference is that the information for investigative consumer reports is obtained through an investigation and interviews with associates, friends, and neighbors of the consumer.

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 interpreted as if the insured did not have an answer to the question. B. The policy will be void C. The insurer may deny coverage later, because of the information missing on the application. D. 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 insurer waived its right to have an answer on the application. -Any unanswered questions need to be answered before the policy is issued. If a policy is issued with questions left unanswered, the contract will interpreted as if the the insurer waived its right to have answer for the question, and will not be able to deny coverage later because of unanswered questions.

The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. what should the insurer do with the application? A.answer the missed questions for the applicant B.acknowledge the missed questions 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 -any unanswered questions need to be answered before the policy is issued. if the the insurer received incomplete applications, they need to be returned to the applicants for completion.