Insurance chapter 2
At what age may a minor purchase a life or health insurance contract? Select one: a. 15 b. 16 c. 18 d. 21
15
Which of the following correctly describes the penalty applied to a company for calling a person whose phone number is on the Do Not Call List? Select one: a. Fine in the amount of $16,000 b. Fine in the amount of $40,000 c. Fine in the amount of $100,000 d. Fine in the amount of $1,000,000
40,000
A life insurance application can usually be backdated for a maximum of how many months? Select one: a. 3 months b. 6 months c. 9 months d. 12 months
6 months
How many months can a life insurance policy be backdated? Select one: a. 6 months b. 9 months c. 12 months d. As many months as desired
6 months
Telemarketers may call phone numbers not on the Do Not Call List from: Select one: a. 7am to 6pm b. 8am to 5pm c. 8am to 9pm d. 9am to 8pm
8am-9am
Which of the following does not demonstrate constructive delivery? Select one: a. The agent mails the policy to the insured b. The insurer mails the policy to the agent, who in turn, mails the policy to the insured c. A conditional receipt is issued to the applicant d. The insurer mails the policy to the insured
A conditional receipt is issued to the applicant
An insurer requests that an applicant for life insurance undergo an HIV test. Which of the following is true? Select one: a. A consent form must be signed by the applicant prior to the test. b. The insurer can inquire about the applicant's sexual orientation. c. Insurers can target specific populations for HIV testing. d. HIV testing cannot be used for underwriting.
A consent form must be signed by the applicant prior to the test.
The term attributed to the person who applies for insurance coverage is _______; the term attributed to the person insured by the policy is ________. Select one: a. Beneficiary; applicant b. Insured; insurer c. Policyowner; insurer d. Applicant; insured
Applicant; insured
Why are life and health insurance contracts said to be contracts of adhesion? Select one: a. Because the insurer writes the contract, to which the insured must adhere b. Because only the insurer is bound to the promises made in the policy c. Because one party has the potential to receive more than the other d. Because certain conditions must be met by all parties of the contract in order for it to be a legally binding contract
Because the insurer writes the contract, to which the insured must adhere
Anna applied for a $1 million life insurance policy and paid the first premium. Later she was declared uninsurable. Her agent gave her a receipt that guarantees coverage until the insurer formally rejects the application. Which type of receipt did Anna receive? Select one: a. Conditional b. Insurability c. Binding d. Approval
Binding
All parties to a contract must be of a legal age, mentally capable of understanding the terms of the contract, and not influenced by drugs or alcohol. Which of the following elements of a legal contract is described? Select one: a. Competent parties b. Consideration c. Agreement d. Legal purpose
Competent parties
Insurers make a promise to pay benefits in the future in the case of death or sickness, what type contract is this? Select one: a. Conditional b. Adhesion c. Unilateral d. Personal
Conditional
If a premium payment has not been given with the application, the policy becomes effective only when the producer delivers the policy and: Select one: a. Provides a conditional receipt b. Secures the applicant's signed application and statement of continued good health c. Explains its provisions, secures the initial premium, and a signed statement of continued good health d. Explains its provisions and leaves a receipt for policy delivery
Explains its provisions, secures the initial premium, and a signed statement of continued good health
Gerald has a chronic medical condition. What will his risk classification be? How will his premium be affected? Select one: a. Gerald's risk classification will be preferred. His premium will be higher. b. Gerald's risk classification will be standard. His premium will be lower. c. Gerald's risk classification will be substandard. His premium will be higher. d. Gerald will be denied coverage.
Gerald's risk classification will be substandard. His premium will be higher.
David signs an application for a $50,000 life policy, pays the initial premium, and receives a conditional receipt. If he were killed in an automobile accident one day later: Select one: a. His beneficiary would receive $50,000, if the application qualified him for the policy for which he applied. b. The insurer could reject the claim because the underwriting process had not been completed by the time of death. c. The insurer would return the amount of the premium because the underwriting process was incomplete. d. The insurer would pay half the policy amount if the application were approved by the underwriting department.
His beneficiary would receive $50,000, if the application qualified him for the policy for which he applied.
Coverage begins on the application date or date of medical exam for which of the following? Select one: a. Insurability receipt b. Nonnegotiable receipt c. Premium receipt d. Approval receipt
Insurability receipt
Which report may contain information gathered through interviews with friends and neighbors, employers and coworkers, who know the insured? Select one: a. Agent's report b. Investigative report c. Medical report d. Insurer's report
Investigative report
Which of the following is not required in a legal contract? Select one: a. Consideration b. Acceptance c. Invitation to offer d. Legal purpose
Invitation to offer
Which of the following statements about a temporary insurance agreement is CORRECT? Select one: a. Coverage begins when the application is signed and the premium is paid, assuming any required medical exam is scheduled within three days. b. It provides temporary coverage until an application is rejected or the policy is issued. c. It provides protection against death by accident, but not death from natural causes. d. It provides term insurance protection until the policy is converted to permanent insurance.
It provides temporary coverage until an application is rejected or the policy is issued.
What action will the life insurance company most likely take when an applicant for a life insurance policy is discovered to be substandard risk? Select one: a. Decline issuance of the policy b. Require the applicant undergo a physical examination c. Require the applicant pay additional premium d. Request the applicant provide proof of insurability for the past 10 years
Require the applicant undergo a physical examination
In Ray's application for life insurance an applicant failed to complete one part regarding family history. In his statement, the agent described the family as long-lived and healthy. If an insurance company accepts the application in the incomplete form and the applicant for coverage dies young from a cardiac condition that had taken the lives of both his parents before age 50, will the company deny or accept the claim of the beneficiaries? Select one: a. It will deny the claim, based on misrepresentation. b. It will deny the claim, based on concealment. c. It will deny the claim, based on breach of warranty. d. It will pay the claim, because in accepting the application, it waived its right to the missing information.
It will pay the claim, because in accepting the application, it waived its right to the missing information.
Wesley fills out an application for a life insurance policy and submits it to the agent on January 5th. He does not include the first premium payment. Wesley undergoes the required medical examination on January 7th. The insurance company approves Wesley's application on January 15th. Wesley's agent delivers the policy to Wesley on January 17th. At this time, Wesley writes out a check for the initial premium. On what date is Wesley's policy effective? Select one: a. January 5th b. January 7th c. January 15th d. January 17th
January 17th
Margaret makes a change to her insurance application after completing it. Who must initial her change and sign the contract? Select one: a. Margaret b. Margaret and the underwriter c. Margaret and the agent d. Margaret and an executive officer of the insurer
Margaret and the agent
Marge and Ben purchase an insurance policy to cover their family. Who is required to sign the application? Select one: a. Marge, Ben, and each child insured b. Only Marge c. Only Ben d. Marge and Ben
Marge and Ben
Which of the following best describes the MIB? Select one: a. Nonprofit trade organization that supplies insurability information to member companies b. Government agency that collects information about individuals' life and health insurance policies c. State organization that catalogs individuals' life and health insurance claims d. Group of federally-appointed physicians that monitor the medical treatments received by individuals insured by private companies
Nonprofit trade organization that supplies insurability information to member companies
What are the basic elements of a legal contract? Select one: a. Offer, acceptance, consideration, competent parties and legal purpose b. Acceptance and consideration c. Policy face, insuring clause and adhesion d. Competent parties, acceptance and reasonable expectations
Offer, acceptance, consideration, competent parties and legal purpose
Which part of the insurance application is described by the following: the applicant's general information, including name, date of birth, age, sex, social security number, marital status, address, occupation and income are collected? Select one: a. Part 1 b. Part 2 c. Part 3 d. None of the above
Part 1
All of the following statements are true regarding insurance application procedures, EXCEPT: Select one: a. The application is one of the key sources of information used by underwriters. b. The producer is responsible for making sure the applicant has filled out the application completely. c. In many states the application becomes part of the insurance contract. d. Producers can fill in any missing information they discover on the application.
Producers can fill in any missing information they discover on the application.
`Which of the following best describes a life insurance policy in which the proposed insured is not required to undergo a medical examination? Select one: a. Easy policy b. Simply-issued policy c. Simplified issue d. Standard coverage policy
Simplified issue
Who administers the National Do Not Call Registry? Select one: a. The Social Security Administration b. The state insurance department c. The Federal Trade Commission d. The Department of Defe
The Federal Trade Commission
If a company issues a conditional receipt to an applicant who has paid an initial premium for a policy that does not require a medical examination: Select one: a. The company thereby divests itself of all risk. b. The applicant is immediately covered. c. The applicant must yet meet certain conditions before their application can be submitted to the company. d. The company thereby waives its right to refuse to issue a policy.
The applicant is immediately covered.
All of the following are involved in the collection of an applicant's medical history, EXCEPT: Select one: a. The application for the insurance policy b. The attending physician statement c. The agent report d. The consumer report
The consumer report
An individual signed an application for a $100,000 life insurance policy and paid the first premium on January 1. The agent issued an insurability receipt. A week later, the required medical examination proves the person insurable. If the person dies before the insurer approves the application: Select one: a. The coverage will be retroactively effective. b. The coverage will be retroactively effective, but the policy will only pay $50,000. c. No coverage will be provided. d. No coverage will be provided, but the premium will be refunded.
The coverage will be retroactively effective.
Insurance agent Margaret receives life insurance applications from Tim and Tom, who are identical twins, and are each applying for the exact same type of policy with the same face amount. The insurance company issues the policies as applied for, but charges Tom a 15% higher premium. Which of the following best explains the higher premium charged to Tom? Select one: a. Longer free look period b. Insuring clause c. Tom had to undergo a medical examination d. Tom's risk classification
Tom's risk classification
This employee of the insurer assigns risk categories to applicants: Select one: a. Broker b. Agent c. Underwriter d. Actuary
Underwriter
Insurance contracts are one-sided. Which of the following terms best describes this? Select one: a. Aleatory contract b. Unilateral contract c. Conditional contract d. Personal contract
Unilateral contract
Coverage is effective: Select one: a. With collection of the initial premium, approval of the application, policy issuance and delivery b. Upon collection of the application only c. Upon collection of the initial premium only d. When the applicant makes an offer to the insurer
With collection of the initial premium, approval of the application, policy issuance and delivery
Joyce applies for a health insurance policy. When the agent delivers the policy to Joyce, an additional premium is required to account for Joyce's medical conditions. Joyce must agree to pay the additional premium before the policy is effective. The insurer has made: Select one: a. An invitation to offer b. Acceptance c. A counter-offer d. Consideration
a counter-offer
According to the U.S. PATRIOT Act, which of the following is money laundering? Select one: a. Fraudulent use of public funds b. Computer crimes c. Illegal exportation of controlled munitions d. All of the above
all of the above
Both the producer and the ___________ are required to sign the insurance application. Select one: a. Insured b. Applicant c. Beneficiary d. All of the above
applicant
Which of the following is the primary source of information used in underwriting an insurance policy? Select one: a. Attending physician statement b. Application c. Agent report d. Medical Information Bureau
application
The agent must provide the applicant which of the following disclosures that contains general information about the types of life insurance policies available, in language that can be understood by the average person? Select one: a. MIB b. Policy Summary c. Buyer's Guide d. Sales Broachure
buyers guide
What type contract is said to be, if...then? Select one: a. Unilateral b. Personal c. Conditional d. Adhesion
conditional
Janice applies for a life insurance policy. She submits the application with the initial premium for $100,000 whole life. The agent returns the policy with a higher premium and hazardous occupation exclusion. What has the insurer made? Select one: a. Agreement b. Offer c. Invitation to offer d. Counter-offer
counter-offer
Insurance contracts are conditional. Which of the following would be a characteristic of a conditional contract? Select one: a. If a loss occurs, then the insurance company will pay benefits. b. Only the insurance company makes legally enforceable promises in the contract. c. The contract is a "take it or leave it" contract. d. There is an unequal exchange of value with the contract.
if a loss occurs, then the insurance company will pay benefits.
All of the following statements are true regarding warranties, EXCEPT: Select one: a. Warranties are statements that are guaranteed to be true in every respect. b. Insurance companies are held to the principle of warranties. c. Insureds are held to the principle of warranties. d. Breach of warranty is grounds for voiding an insurance contract.
insureds are held to the principle of warranties.
Sam submits an application with initial premium for a life insurance policy on July 6th. The agent issues Sam a conditional receipt at this time. Sam takes the required medical exam on July 10th. The insurer approves the policy on August 1st, and the agent delivers the policy to Sam on August 10th. Which day did Sam's coverage begin? Select one: a. July 6th b. July 10th c. August 1st d. August 10th
july 10th
In order to be valid, a contract must have: Select one: a. Public purpose b. Private purpose c. Government purpose d. Legal purpose
legal purpose
All of the following are important underwriting factors for risk classification in a health insurance policy, EXCEPT: Select one: a. Physical condition b. Marital status c. Financial status d. Occupation
marital status
Part II of the life insurance application includes: Select one: a. The agent's statement or report b. Medical Information c. General Information d. Inspection Statement
medical information
If required by the insurer, the statement of good health must be collected by the producer at the time of: Select one: a. Policy application b. Policy issuance c. Policy delivery d. None of the above
policy delivery
James has above average health and is physically active. He has never smoked. Which risk classification will James most likely be rated? Select one: a. Preferred b. Standard c. Substandard d. Declined
preferred
Field underwriting ________ adverse selection. Select one: a. Increases b. Reduces c. Encourages d. Eliminates
reduces
Which of the following terms best describes the applicant's statements on an insurance application? Select one: a. Indemnities b. Adhesion c. Representations d. Warranties
representations
Insurable interest requires that an individual have a valid concern for the well being of the person insured. In a life policy insurable interest can be present in all of the following, EXCEPT: Select one: a. Business partners b. Second cousins c. Spouse or parent d. Creditors
second cousins
Rates for insurance policies are based on: Select one: a. Marital status and age b. Sex, age and marital status c. Sex and age d. Sex only
sex and age
The agent may be required to collect a _______ from the policyowner upon policy delivery. Select one: a. Statement of good health b. Conditional receipt c. Blood test d. Buyer's guide
statement of good health
Of the following, who must explain the reason for premium increases to a life insurance applicant? Select one: a. The agent b. The insurer c. The underwriter d. None of the above
the agent
Who completes field underwriting? Select one: a. The insurer b. The insured c. The agent d. None of the above
the agent
All of the following are part of the consideration element of an insurance contract, EXCEPT: Select one: a. The insurer's promise to pay a covered loss b. The applicant's statements on the application c. The initial premium paid by the applicant d. The applicant's promises
the applicants promises
All of the following correctly demonstrate policy delivery, EXCEPT: Select one: a. The insurance company mails the policy to the policyowner b. The insurance agent delivers the policy in-person c. The application is approved by the underwriter d. The insurance company mails the policy to the insurance agent, who in turn, delivers the policy to the policyowner
the application is approved by the underwriter
John purchases a life insurance policy for his wife Jean. Which of the following best describes who is legally bound to the policy's promise of benefits? Select one: a. The insurer, John and Jean b. The insurer and John c. The insurer and Jean d. The insurer
the insurer
The process of selecting and classifying risks is best described by which of the following terms? Select one: a. Underwriting b. Classification c. Designation d. Specification
underwriting
Which of the following best describes the process used to select and classify risks? Select one: a. Rating b. Discrimination c. Risk classification d. Underwriting
underwriting