Chapter One: Completing the application, underwriting and delivering the policy (QUIZ)

In Insurance, and offer is usually made when? A. The agent hands the policy to the policy holder. B. An applicant submits an application to the insurer C. An agent explains a policy to a potential applicant D. The insurer approves the application and receives the initial premium.

An Applicant submits an application to the insurer. EXPLINATION: In insurance, the offer is usually made by the applicant in the from of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information? A. Application B. Medical Records C. Interviews D. State records

Application EXPLINATION: The application contains most of the information used for underwriting purposes. This is why its completeness and accuracy are so crucial.

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to? A. Require a yearly medical examination. B. Lowe its insurability standards C. Refuse to issue the policy D. Charge a higher premium.

Charge a higher premium EXPLINATION: The premium rate will be adjusted to reflect the insured's increased risk.

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as? A. Aleatory Contracts B. Binding Contracts C. Contracts of adhesion D. Unilateral Contracts

Contracts of Adhesion EXPLINATION: Insurance policies are written by the insurer and submitted to the insured on a take-it-or leave-it basis. The insured does not have any inputs into the contract, but simply adheres to the contract.

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? A. Disclosure Rule B. Fair credit Reporting Act C. Consumer Privacy Act D. Conditional Receipt

Fair Credit Reporting Act EXPLINATION: The Fair Credit Reporting Act governs what info can be collected and how the info can be used.

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of report is that? A. Inspection Report B. Agents Report C. Underwriters Report D. Medical Information Bureau's Report

Inspection Report EXPLINATION: Inspection reports cover moral and financial information regarding a potential insured, usually supplied by private investigators and credit agencies. Companies that use inspection reports are subject to the rules outlined in the Fair Credit Reporting Act.

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

Insurance Companies From Adverse selection by high risk persons. EXPLINATION: The MIB makes information available to underwriters to assist them in the underwriting process it is a nonprofit trade originations which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals.

As a field underwriter, an agent is responsible for all of the following tasks EXCEPT? A. Help prevent adverse Selection B. Issue the policy that is requested C. Obtain appropriate signatures on the application for insurance D. Solicit business that will fall within the insurer's underwriting guidelines

Issue The Policy Requested EXPLINATION: The agent does not issue the policy, but he or she delivers the policy. The agent has a duty to solicit business that will fall within the underwriting guidelines and represent profitable buisness to the insurer (help prevent adverse selection)

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

It is indented to provide coverage on a date prior to the policy issue. EXPLINATION: 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

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report? A. Are entitled to obtain a copy of the report from the party who ordered it. B. Must be advised that a copy of the report is available to anyone who requests it C. May sue the reporting agency in order to get inaccurate data corrected. D. Must be informed of the source of the report.

Must be informed of the source of the report. EXPLINATION: Under the Fair Credit Reporting Act, if an insurance policy is declined or modified because of information constrained in a consumer report, the consumer must be advised and provided with the name and address of the reporting agency.

prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will? A. Automatically pay the policy proceeds B. Not pay the policy proceeds under any circumstances C. Pay the policy proceeds up t an established limit D. Pay the policy proceeds only if it would have issued the policy

Pay the policy proceeds only if it would have issued the policy. EXPLINATION: The conditional receipt says that coverage will be effective either on the date of the application or the date of the medical exam, whoever 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 Federal Fair Credit Reporting Act A. Prevents Money Laundering. B. Regulates Consumer Reports C. Protects customer Privacy D. Regulates telemarketing

Regulates Consumer Reports. EXPLINATION: The Federal Fair Credit Reporting Act regulate consumer reports, also known as consumer investigative reports, or credit reports

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

Standard EXPLINATION: 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

Which of the following statement is correct about a standard risk classification in the same age group and with similar lifestyles? A. Standard risk is also known as high exposure risk. B. Standard Risk pays a higher premium than s substandard risk C. Standard risk is representative of the majority of people D. Standard risk requires extra rating

Standard risk is representative of the majority of people. EXPLINATION: Standard Risks are representative of the majority of people in their age and with similar lifestyles. They are the average risk.

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

The application is given to a prospective insured. EXPLINATION: Consideration is something of value that is transferred between the two parties to form a legal contract.

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

The customers associates, friends, and neighbors provide the report's data EXPLINATION: 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 used 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.

Whose responsibility is it to make certain that an application for insurance is filled out completely and correctly? A. The Beneficiary of the applicant B. The insurance company C. The applicant D. The producer.

The producer EXPLINATION: It is the responsibility of the producer (agent) to make sure an application for insurance is filled out completely and correctly

What is the purpose of the buyer's guide? A. To allow the consumer to compare the costs of different policies B. To provide information about the issued policy C. To provide the name and address of the agent/producer Issuing the policy D. To list all policy Riders

To allow the consumer to compare the cots of different policies EXPLINATION: The buyer's guide provides generic information about life insurance polices and allows the consumer to compare the costs of different polices. The policy summary provides specific information about the issued policy, as well as the insurer's info

In forming an insurance contract, when does acceptance usually occur? A. When an insurer's underwriter approves coverage B. When an insurer delivers the policy C. When an insurer receives an application D. When an insured submits an application.

When an insurer's underwriting approves coverage EXPLINATION: In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy