Completing the Application, Underwriting, and delivery of an Insurance Policy

a participating insurance policy may do which of the following?

pay dividends to the policyowner A participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest and costs.

Upon policy deliver, the producer may be required to obtain any of the follownig except

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

Which of the following is not the consideration in a policy

the application given to a prospective insured

What is the purpose of a buyers guide?

to allow the consumer to compare the costs of different policies: the buyers guid provides generic info about life insurance policies and allows the consumer to compare costs. the policy summary provides specific info about the issued policy as well as the insurers info

Nonparticipating stock policy

does not pay dividends to policyowners; however, taxable dividends are paid to stockholders

Y's insurer has made all the decisions regarding the provisions included in her policy. Y finds an obectionable provision and wants to negotiate it with the insurer but is not allowed to do so. Her options are to reject the policy or accept it as is. Which contract feature does this describe?

Adhesion. A contract adhesion is prepared by the insurer; the insured's only option is to accept or reject the policy as it is written.

Which of the following would be considered a nonmedical insurance application?

An application on which the medical information is completed by the applicant and the agent only

An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an

Authorized insurer

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as

Consideration

Which of the following best describes the aleatory nature of an insurance contract?

Exchange of unequal values. An aleatory contract is a contract in which unequal amounts of values are exchanged. The amount of premium the insured pays is much less than the potential loss assumed by the insurer.

Stranger-originated life insurance policies are in direct opposition to the principle of

Insurable interest Because the purchaser of a stranger-originated life insurance policy doesn't know the insured, or have any interest in the insured's longevity, STOLI policies violate the principle of insurable interest.

Domicile of Insurer

Insurers can also be defined by their location of incorporation and wheather or not they are authorized to write business in a state. The insurer's domicile, or location of incorporation, will determine whether an insurance company is condidered domestic or alien. In the state they are incorporated in, they are considered domestic insurer. If the insurer is operating in a sate other than the one they are incorporated in, they are called a foreign insurer. If the insurer is incorporated outside the US they are considered alien insurure

Which of the following is NOT true regarding Certificate of Authority?

It is issued to group insurance participants. Before insurers may transact business in a specific state, they must apply for a license of Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set down by the state.

Which of the following would provide an underwriter with information concerning an applicant's health history?

The medical Information Bureau. An agent's report and inspection report provides personal info. Medical exams provide info on current health. Only the MIB will provide an applicants medical history

unilateral contract

only one of the parties in the contract is legally bound to do anything. the insured makes no legally binding promises. However, an insurer is legally bound to pay losses covered by a policy in force.

An applicant signs an application for $25,000 life insurnace policy, pays the initial premium, and receives a conditional receipt. If the applicant is killed in an auto accident the next day

the beneficiary would receive $25,000 if it was determined that the insured qualified for the policy applied for. The conditional receipt provides that when the applicant pays the initial premium, coverage is effective on the condition that the applicant proves to be insurable either on the date the application was signed or the date the medical examination, if one is required.

Policy Summary

written statement describing features and elements of the policy being issued. Must include: name, address, full name and home office or adm. office addresses of insurere, the generic name of the basic policy and each rider. a policy summary will also include premium, cash value, divident, surrender value and death benefit figures for specific policy years. the policy summary must be povided when policy is delivered.

Insurance is a contract by which one seeks to protect another form

Loss

Insurance is the transfer of

Risk

Stranger-Oriented Life Insurance (STOLI)

STOLI is a life insurance agreement in which a person with no relationship to the insured (a "stranger") purchases a life policy on the insured's life with the intent of selling the policy to an investor and profiting financially when the insured dies. In other words, STOLIs are financed and purchased solely with the intent of selling them for life settlements. STOLIs violate the principle of insurable interest, which is in place to ensure that a person purchasing a life insurance policy is actually interested in the longevity rather than the death of the insured. Because of this, insures take an aggressive legal stance against policies they suspect are involved in STOLI transactions.

Which of the following is a risk classification used by underwriters for life insurance?

Standard The three rating classifcations that denote risk level iof insureds are standard, substandard, and preferred. The classifcation system helps insures to decide if an insured should pay a higher premium

Insurance companies may be classified according to the legal form of their ownership. The type of company organized to return any surplus money to their policyholders is

A mutual insurer Mutual companies are owned and controlled by their policyholders. Any surplus money is returned to the policyholders as dividents

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements:

Consideration, Legal Purpose, Offer and Acceptance. Conditiions is not one because it is a part of the policy structure.

Representations are written or oral statements made by the applicant that are

Considered true to the best of the applicants knowledge

An agent tries to sell insurance over the phone to an applicant who appears confused but is eventually able to give enough information for the application to be completed. After the policy was issured, the agent talked to the insured's family, and they explained that the insured was recovering from a surgery and might have been under the influence of medication at the time of application. Which of the following is true?

The Policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application. When an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. Because the applicant was confused, it is possible she was suffering from pain or could have been affected by medication, or was having other issues; therefore, if it can be proven that thae applicant was incapable of making a buying decision during the application and acceptance process, the policy could be voided.

What is the purpose of disclosure statement in life insurance policies?

To explain features and benefits of a proposed policy to the consumer. Disclosure statements will help the applicants to make more informed and educated decisions about their choice of insurance.

IN INSURANCE policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract does this describe?

Unilateral

considertion

is something of value that is transferred between two parties to form a legal contract. The consideration of the part of the insured payment of premium and the representations made in the application. the consideration on the part of the insurer is the promise to pay in the event of loss

Illustration

means a presentation or depiction that inludes nonguaranteed elements of a policy of individual or group life insurance over a period of years. a life insurance illustration must do the following Distinguish between guarnateed and projected amounts; clearly state than illustration is not a part of the contract; identify those values that are not guaranteed as such An agent may only use the illustrations of the insurer that have been approved, and may not change them in any way.

If a consumer request additional information concerning an Investigative Consumer Report, how long does the insurer or reporting agency have to comply?

5 Days Consumers must be advised that they have a right to request additional information concerning Investigative Consumer Reports, and the insurer or reporting agency has 5 days to provide the consumer with the additional information.

Which of the following is NOT an essential element of an insurance contract?

Counteroffer In order for insurance contracts to be legally binding, they must have 4 essential elements. agreement- offer and acceptance, consideration, competent parties, and legal purpose.

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

Whether an insurable interest exists between the individuals. An insurable interest must exist at the time the policy is issued. Some relationships are automatically presumed to qualify as an insurable interest, E.G., spouses, parents, children and certain business relationships Insurable interest is not required of beneficiaries. Since the beneficiary's well-being is dependent upon the insured, and the beneficiary's life is not the one being insured, the beneficiary does not have to show an insurable interest for a policy to be purchased.

stock companies

are owned by stockholders who provide the capital necessary to establish and operate the insurance company and who share any profits or losses.Officers are elected by the stockholders and manage stock insurance companies. tradtionally, stock companies issue nonparticipating policies, in which policyowners do not share in profits or losses.

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as request. When does the policy coverage become effective?

as of the applicaiton date.

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 EXCEPT the applicants

Ancestry. The Fair Credit Reporting Act regulates what information may be collected and how the information may be used. Consumer Reports include written and/or oral information regarding consumer's credit, character, reputation, and habits collected by the reporting agency from employment records, credit reports, and other public sources. Ancestry is not relevant factor assessed in these reports.

Which of the following reports will provide the underwriter with the information about an insurance applicant's credit?

Consumer Report