COMPLETING THE APPLICATION, UNDERWRITING, AND DELIVERING THE POLICY
A
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT A) Conditions B) Consideration C) Legal Purpose D) Offer and Acceptance
C
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
B
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) Which individual will pay the premium B) Whether an insurable interest exists between the individuals C) The gender of the applicant D) The type of the policy requested
C
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 missing information 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
A
If the policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than A) With the policy B) Upon issuance of the policy C) Within 30 days after the first premium payment was collected D) Prior to filling out an application for insurance
C
In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT A) Applicant's present physical condition B) Applicant's present occupation C) Applicant's past income D) Applicant's past medical history
C
In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? A) They provide information about a customer's character and reputation B) The customer has no knowledge of this action C) The customer's associates, friends, and neighbors provide the report's data D) They provide additional information from an outside source about a particular risk
D
In forming an insurance contract, when does acceptance usually occur? A) When an insurer delivers the policy B) When an insurer receives an application C) When an insured submits an application D) When an insured's underwriter approves coverage
C
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? A) the applicant's habits and health do not affect the premiums B) It will likely be lower because the applicant is a preferred risk C) It will likely be higher because the applicant is a substandard risk D) It will likely be the average premium issued to standard risks
D
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe? A) Unilateral B) Conditional C) Personal D) Adhesion
B
Most agents try to collect the initial premium for submission with the application. When an agent collects the in initial premium from the applicant, the agent should issue the applicant a A) Warranty B) Premium receipt C) Statement of good health D) Backdated receipt
C
Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT A) Alcohol and tobacco consumption B) Recent surgeries C) Other insurance coverages D) Family health history
B
Representations are written or oral statements made by the applicant that are A) immaterial to the actual acceptability of the insurance contract B) Considered true to the best of the applicant's knowledge C) Guaranteed to be true D) Found to be false after further investigation
A
The Federal Fair Credit Reporting Act A) Regulates consumer reports B) Protects customer privacy C) Regulates telemarketing D) Prevents money laundering
D
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) A notice regarding replacement B) A privacy notice C) A Buyer's Guide D) A policy summary
B
Which of the following includes information regarding a person's credit, character, reputation, and habits? A) Agent's report B) Consumer report C) Consumer history D) Insurability report
B
Which of the following is NOT an essential element of an insurance contract? A) Legal purpose B) Counteroffer C) Consideration D) Agreement
D
Which of the following is NOT an example of a valid insurable interest? A) Business partners in each other's lives B) Employer in key employee's life C) Child in parents' lives D) Debtor in the life of a creditor
A
Which of the following is NOT the consideration in a policy? A) the application given to the prospective insured B) Something of value exchanged between parties C) The premium amount paid at the time of application D) The promise to pay for covered losses
B
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? A) Illustrations B) Buyer's Guide C) Insurance Index D) Policy Summary
D
Which of the following is a risk classification used by underwriters for life insurance? A) Poor B) Normal C) Excellent D) Standard
D
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? A) Unfair Trade Practices Law B) The Guaranty Association C) Consumer Privacy Act D) The Fair Credit Reporting Act
C
Which of the following reports will provide the underwriter with the information about an insurance applicant's credit? A) Agent's report B) Any federal report C) Consumer report D) Inspection report
A
Which of the following types of risks will result in the highest premium? A) Substandard risk B) Standard risk C) Preferred risk D) All risks pay equal premiums
C
Which of the following will be included in a policy summary? A) Comparisons with similar policies B) Primary and secondary beneficiary designations C) Premium amounts and surrender values D) Copies of illustrations and application
B
Which of the following would provide an underwriter with information concerning an applicant's health history? A) The Inspection Report B) The Medical Information Bureau C) A medical examination D) The agent's report
D
Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives? A) Inspection Report B) Agent's Report C) General In formation D) Medical Information
A
Who makes up the Medical Information Bureau? A) Insurers B) Hospitals
D
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
D
Why should the producer personally deliver the policy when the first premium has already been paid? A) To ensure the producer gets paid commission B) To find out how the family has been doing since the initial presentation C) To make sure the policy is not stolen or lost D) To help the insured understand all aspects of the contract
C
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? A) Representation B) Adhesion C) Consideration D) Good faith
C
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) Agent's Report B) Underwriter's Report C) Inspection Report D) Medical Information Bureau's Report
B
Another name for a substandard risk classification is A) Elevated B) Rated C) Controlled D) Declined
D
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
A
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will A) Pay the policy proceeds only if it would have issued the policy B) Pay the policy proceeds up to an established limit C) Not pay the policy proceeds under any circumstances D) Automatically pay the policy proceeds
B
According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT A) Failure to pay off a loan B) Disputes regarding consumer report information C) Tax delinquencies D) Late payments
B
All of the following are requirements for life insurance illustrations EXCEPT A) The must differentiate between guaranteed and projected amounts B) They must be part of the contract C) They may only be used as approved D) They must identify non-guaranteed values
B
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) When the agent submits the applicant to the company and the company issues a conditional receipt B) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health C) On the designated effective date D) On the application date
B
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 application will be voided B) The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy C) The premium would be returned to the insured's estate because the policy was not issued D) the death claim will be rejected
B
An insurance contract must contain all of the following to be considered legally binding EXCEPT A) Competent parties B) Beneficiary's consent C) Offer and acceptance D) Consideration
A
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe? A) Aleatory B) Good health C) Adhesion D) Conditional
D
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) As of the policy deliver date B) As of the first month after the policy issue C) As of the policy issue date D) As of the application date
A
The term "illustration" in a life insurance policy refers to A) A presentation of non-guaranteed elements on a policy B) A depiction of policy benefits and guarantees C) Pictures accompanying a policy D) Charts and graphs
C
Upon policy delivery, the producer may be required to obtain any of the following EXCEPt A) payment of premium B) delivery receipt C) signed waiver of premium D) statement of good health
B
What describes the information about a policy? A) Producer's report B) Policy summary C) Illustartions D) Buyer's guide
B
What do individuals use to transfer their risk of loss to a larger group? A) Indemnity B) Insurance C) Insurable Interest D) Exposure
C
What is the purpose of a conditional receipt? A) It serves as proof that the applicant has been determined insurable B) It is given to only applicants who fully prepay the premium C) It is intended to provide coverage on a date prior to the policy issue D) It guarantees that a policy will be issued in the amount applied for
A
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 guarantees that a policy will be issued in the amount applied for C) It serves as proof that the applicant has been determined insurable D) It is given only to applicants who fully prepay the premium
A
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) Issue the policy anyway and pay the face value to the beneficiary B) Negotiate a reduced settlement with the beneficiary due to the unusual circumstances involved C) Return the premium to Y's estate, since it has no obligation to pay the death claim D) Keep the premium and reject the risk on the basis that the applicant died before the policy can be issued
C
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? A) Contract of adhesion B) Acceptance C) Consideration D) Legal purpose
C
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is A) Personal B) Unilateral C) Conditional D) Aleatory
D
When is the earliest a policy may go into effect? A) When the first premium is paid and the policy has been delivered B) When the insurer approves the application C) After the underwriter reviews the policy D) When the application is signed and a check is given to the agent
C
When must insurable interest exist in a life insurance policy? A) When there is a change in the beneficiary B) At the time of loss C) At the time of application D) At the time of policy delivery
D
When would a misrepresentation on an insurance application be considered fraud? A) Never: statements by the applicant are only representations B) When the application is incomplete C) Any misrepresentation is considered fraud D) If it is intentional and material
B
Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application? A) Fill in the blanks to the best of the insurer's knowledge B) Return the application to the applicant for completion C) Issue a policy anyway since the application has been submitted D) Ask the producer who solicited the policy to complete and resign the application
A
Which of the following best details the underwriting process for life insurance? A) Selection, classification, and rating of risks B) Solicitation, negotiation, and sale of policies C) Issuance of policies D) Reporting and rejection of risks