Insurance Exam Ch 1: Completing the Application, Underwriting, and Delivering the Policy

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) Offer and acceptance B) Conditions C) Consideration D) Legal purpose

B) Conditions

Which of the following is NOT an essential element of an insurance contract? A) agreement B) Legal Purpose C) Counteroffer D) Consideration

C) Counteroffer

Insurance is the transfer of

Risk

Why should the producer personally deliver the policy when the first premium has already been paid?

To help the insured understand all aspects of the contract.

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?

When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health.

Insurance Policy

a contract between a policy owner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events

Agent/ Producer

a legal representative of an insurance company; the classification of producer usually includes agents and brokers; agents are the agents of the insurer

Applicant

a person applying for insurance

Beneficiary

a person who receives the benefits of an insurance policy

Life Insurance

coverage on human lives

Adverse Selection

insuring of risks that are more prone to losses than the average risk

Insured

person covered by the insurance policy; may or may not be the policyowner

Lapse

policy termination due to nonpayment of premium

Death benefit

the amount paid upon the death of the insured in a life insurance policy

Insurer (principal)

the company who issues an insurance policy

Premium

the money paid to the insurance company for the insurance policy

Policyowner

the person entitled to exercise the rights and privileges in the policy