Life Insurance Test (completing the application, underwriting, and delivering the policy)

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?

Unilateral

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 ______ .

Ancestry

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?

Consideration the binding force in any contract is consideration. consideration on the part of the insured is the payment of premiums and the health representations made in the application. Consideration on the part of the insurer is the promise in the event of loss.

Adverse Selection

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

Which of the following is NOT the consideration in a policy?

The application given to a prospective insured (consideration is something of value that is transferred between the two parties to form a legal contract)

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

The beneficiary would receive $25,000 if it was determined that the insured qualified for the policy applied for. (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 of the medical examination, if one is required.)

In insurance, an offer is usually made when ______ .

The completed application is submitted. acceptance takes place when an insurer;s underwriter approves the application and issues a policy.

a. How is it determined whether an insurer is allowed to write business in a state?

The insurer's domicile or location of incorporation will determine whether a company is domestic, foreign, or alien.

insurance policy

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

Applicant / proposed insured

a person applying for insurance

Death benifit

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

Agent / Producer

legal rep. of an insurance company: the classification of producer usually includes agents and brokers: agents are the agents of the insurer.

If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?

5 Days

An insurer has made all of the decisions regarding the provisions in the insured's policy. The insured finds an objectionable provision and whats to negotiate it with the insurer but is not allowed to do so. Her only options are to reject the policy or accept it as is. Which contract feature does this describe?

Adhesion. (prepared by only the insurer; the insured's only option is to accept the policy as is written.)

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?

As of the application date

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as _____ .

Contracts of adhesion Insurance policies are written by the insurer and submitted to the insured on a take it or leave it basis. the insured does not have any input into that contract, but simply adheres to the contract.

What is the purpose of a conditional receipt?

It is intended to provide coverage on a date earlier than the date of the issuance of the policy. (coverage commences on the date of the application or the date of a medical examination, whichever is later, on the condition that the applicant is determined to be insurable at the rate applied for)

Which of the following information about the applicant is NOT included on Part 1 of the application for insurance?

Medical Background Part 1 = name, age, address, birth date, gender, income, marital status, and occupation. The applicant's medical background is addressed in part 2, medical info

A prospective insured receives a conditional receipt but died before the policy is issued. The insurer will _____ .

Pay the proceeds only if it would have issued the policy. (the conditional receipt says that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, as long as the applicant is found to be insurable as a standard risk, and policy is issued exactly as applied for.)

Insured

a person covered by the insurance policy; may or may not be the policy owner.

Beneficiary

a person who recieves the benifits of an insurance policy

When must insurable interest exist in a life insurance policy?

at the time of application (i'm life insurance, insurable interest must exist at the time of application.)

Stranger-oriented life insurance policies are in direct opposition to the principal of

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