Completing the application, underwriting, and delivering the policy
A producer agent must do all of the following when delivering a new policy to the insured EXCEPT A. Disclose commissions earned from the sale of the policy. B. Explain the policy provisions, riders, and exclusions. C. Collect any premium due. D. Explain the rating procedures if the policy is rated differently than applied for.
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.
A.
All of the following are duties and responsibilities of producers at the time of application EXCEPT A. Change any incorrect statement on the application by personally initialing next to the corrected statement. B. Explain the nature and type of any receipt the producer is giving to the applicant. C. Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information. D. Check to make sure that there are no unanswered questions on the application.
A.
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 delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health B. On the designated effective date C. On the application date D. When the agent submits the application to the company and the company issues a conditional receipt
A.
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? A. 5 days B. 7 days C. 10 days D. 3 days
A.
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. Ancestry. B. Credit history. C. Habits. D. Prior insurance.
A.
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. It will likely be higher because the applicant is a substandard risk. B. It will likely be the average premium issued to standard risks. C. The applicant's habits and health do not affect the premiums. D. It will likely be lower because the applicant is a preferred risk.
A.
The term "illustration" in a life insurance policy refers to A. A presentation of non-guaranteed elements of a policy. B. A depiction of policy benefits and guarantees. C. Pictures accompanying a policy. D. Charts and graphs.
A.
Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called A. Material misrepresentations. B. Fraudulent statements. C. Warranties. D. Common errors.
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 an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? A. Consideration B. Legal purpose C. Contract of adhesion D. Acceptance
A. *Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application.
The Gramm-Leach-Bliley Act was passed to A. Protect private customer information filed with a financial institution. B. Define insurance as interstate commerce. C. Allow consumers access to credit and private consumer reports. D. Allow insurance companies access to medical information for underwriting purposes.
A. *The Gramm-Leach-Bliley Act was passed to protect private customer information that is filed with a financial institution. Customers must be given two disclosure notices (one at the onset of business and one before information is disclosed), as well as a yearly updated disclosure notice.
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will A. Automatically pay the policy proceeds. B. Pay the policy proceeds only if it would have issued the policy. C. Pay the policy proceeds up to an established limit. D. Not pay the policy proceeds under any circumstances.
B.
All of the following information about the applicant is identified in the General Information section of a life insurance application EXCEPT A. Occupation. B. Education. C. Age. D. Gender.
B.
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? A. The date of application B. The date of medical exam C. The date of policy delivery D. The date of issue
B.
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. Binding contracts. B. Contracts of adhesion. C. Unilateral contracts. D. Aleatory 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 policy requested.
B.
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE? A. The insurer may deny coverage later, because of the information missing on the application. B. The policy will be interpreted as if the insurer waived its right to have an answer on the application. C. The policy will be interpreted as if the insured did not have an answer to the question. D. The policy will be void.
B.
In terms of parties to a contract, which of the following does NOT describe a competent party? A. The person must be mentally competent to understand the contract. B. The person must have at least completed secondary education. C. The person must not be under the influence of drugs or alcohol. D. The person must be of legal age.
B.
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.
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
B.
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 in favor of the insured
B.
Which of the following best details the underwriting process for life insurance? A. Reporting and rejection of risks B. Selection, classification, and rating of risks C. Solicitation, negotiation and sale of policies D. Issuance of policies
B.
Which of the following is NOT an example of a valid insurable interest? A. Child in parents' lives B. Debtor in the life of the creditor C. Business partners in each other's lives D. Employer in key employee's life
B.
Which of the following is the basic source of information used by the company in the risk selection process? A. Consumer report B. Application C. Agent's report D. Warranty
B.
Which of the following statements 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 is representative of the majority of people. C. Standard risk pays a higher premium than a substandard risk. D. Standard risk requires extra rating.
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
B. *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.
Which of the following is NOT the consideration in a policy? A. The promise to pay covered losses B. The application given to a prospective insured C. Something of value exchanged between parties D. The premium amount paid at the time of application
B. *Consideration is something of value that is transferred between the two parties to form a legal contract.
Which of the following reports will provide the underwriter with the information about an insurance applicant's credit? A. Any federal report B. Consumer report C. Inspection report D. Agent's report
B. *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? A. Underwriter's Report B. Inspection Report C. Medical Information Bureau's report D. Agent's Report
B. *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.
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report A. Must be advised that a copy of the report is available to anyone who requests it. B. May sue the reporting agency in order to get inaccurate data corrected. C. Must be informed of the source of the report. D. Are entitled to obtain a copy of the report from the party who ordered it.
C.
When must insurable interest exist in a life insurance policy? A. When there is a change of the beneficiary B. At the time of loss C. At the time of application D. At the time of policy delivery
C.
When would a misrepresentation on the insurance application be considered fraud? A. When the application is incomplete B. Any misrepresentation is considered fraud. C. If it is intentional and material D. Never: statements by the applicant are only representations.
C.
Which of the following documents delivered to the policy owner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years? A. A privacy notice B. A buyer's guide C. A policy summary D. A notice regarding replacement
C.
Which of the following is NOT the consideration in a policy? A. The premium amount paid at the time of application B. The promise to pay covered losses C. The application given to a prospective insured D. Something of value exchanged between parties
C.
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? A. The Guaranty Association B. Consumer Privacy Act C. The Fair Credit Reporting Act D. Unfair Trade Practices Law
C.
Which of the following would qualify as a competent party in an insurance contract? A. The applicant is a 12-year-old student. B. The applicant is under the influence of a mind-impairing medication at the time of application. C. The applicant has a prior felony conviction. D. The applicant is intoxicated at the time of application.
C.
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? A. Indemnity B. Representation C. Warranty D. Concealment
C. *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 only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it? A. Conditional B. A legal (but unethical) contract C. Unilateral D. Adhesion
C. *In a unilateral contract, only one of the parties to the contract is legally bound to do anything.
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. Consideration. B. Legal purpose. C. Offer and acceptance. D. Conditions.
D.
If a 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. Upon issuance of the policy. B. Within 30 days after the first premium payment was collected. C. Prior to filling out an application for insurance. D. With the policy.
D.
If an agent fails to obtain an applicant's signature on the application, the agent must A. Sign the application for the applicant. B. Sign the application, stating it was by the agent. C. Send the application to the insurer with a note explaining the absence of signature. D. Return the application to the applicant for a signature.
D.
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be A. Certified. B. Qualified. C. Approved. D. Authorized.
D.
In insurance, an offer is usually made when A. The insurer approves the application and receives the initial premium. B. The agent hands the policy to the policyholder. C. An agent explains a policy to a potential applicant. D. An applicant submits an application to the insurer.
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
D.
What describes the specific information about a policy? A. Illustrations B. Buyer's guide C. Producer's report D. Policy summary
D.
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. Negotiate a reduced settlement with the beneficiary due to the unusual circumstances involved. B. Return the premium to Y's estate, since it has no obligation to pay the death claim. C. Keep the premium and reject the risk on the basis that the applicant died before the policy could be issued. D. Issue the policy anyway and pay the face value to the beneficiary.
D.
When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information? A. Interviews B. State records C. Medical records D. Application
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
D.
Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company? A. Adhesion B. Subrogation C. Warranty D. Aleatory
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
D.
Which of the following will be included in a policy summary? A. Copies of illustrations and application B. Comparisons with similar policies C. Primary and secondary beneficiary designations D. Premium amounts and surrender values
D. *A policy summary must be delivered along with the policy and will provide the producer's name and address, the 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.
What is the purpose of the buyer's guide? A. To provide the name and address of the agent/producer issuing the policy B. To list all policy riders C. To provide information about the issued policy D. To allow the consumer to compare the costs of different policies
D. *The buyer's guide provides generic information about life insurance policies and allows the consumer to compare the costs of different policies. The policy summary provides specific information about the issued policy, as well as the insurer's information.
An insurance contract must contain all of the following to be considered legally binding EXCEPT A. Offer and acceptance. B. Consideration. C. Competent parties. D. Beneficiary's consent.
D. *The four essential elements of all legal contracts are offer and acceptance, consideration, competent parties, and legal purpose.