1. Snapshot. Completing The Apps, Underwriting And Delivering The Policy

Question 1

What’s insurance?

Answer 1

contract in which one party (the insurance company) agrees to indemnify (make whole) the insured party against loss, damage or liability arising from an unknown event.

Question 2

In life insurance, when must insurable interest exist?

Answer 2

policyowner must face the possibility of losing money or something of value in the event of loss

Question 3

What four elements of an insurable contract?

Answer 3

1. Agreement — offer and acceptance;
2. Consideration;
3. Competent parties; and
4. Legal purpose.

Question 4

What does representation mean and how does it differ from a warranty?

Answer 4

statements believed to be true to the best of one’s knowledge and a warranty is absolutely true statement upon which the validity of the insurance policy depends

Question 5

What does insurance solicitation mean?

Answer 5

attempt to persuade a person to buy an insurance policy

Question 6

What information does a Buyer’s Guide provide?

Answer 6

document explains how a buyer should go about choosing the amount and type of insurance to buy, and how a buyer can save money by comparing the costs of similar policies

Question 7

What is underwriting?

Answer 7

analysis of many different factors to determine the acceptability of applicants for insurance

Question 8

What information is gathered in Parts 1 & 2 of the application?

Answer 8

Pt1: General Information about the applicant, such as name, age, address, birth date, gender, income, marital status, and occupation
Pt2: Medical Information of present health, any medical visits in recent years, medical status of living relatives, and causes of death of deceased relative

Question 9

What is the purpose of the agent’s report?

Answer 9

provides the agent’s personal observations concerning the proposed insured

Question 10

Who is required to sign an application for life insurance?

Answer 10

Both the agent and the proposed insured.
Insurance on an employee, then the policyowner.
Parent or guardian, applying for insurance on a minor child.

Question 11

When does an insurance policy go in effect?

Answer 11

found to be insurable as a standard risk, and policy is issued exactly as applied for

Question 12

What is the purpose of the Fair Credit Reporting Act?

Answer 12

procedures agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used

Question 13

What is the difference between a consumer report and an investigative consumer report?

Answer 13

An investigation is obtained through interviews with associates, friends and neighbors of the consumer

Question 14

How does a substandard risk policy differ from a standard risk?

Answer 14

Sub - applicants are not acceptable at standard rates because of physical condition, personal or family history of disease, occupation, or dangerous habits and usually have higher premiums.
Standard - entitled to insurance protection without extra rating or special restrictions

Question 15

What are the 3 factors that determine the premium for a particular policy?

Answer 15

risk (mortality - rate of death within a specific group), interest and expense

Question 16

When would an insured be required to sign a statement of good health?

Answer 16

When the premium wasn’t initially paid when the policy was completed and verifies that the insured has not suffered injury or illness since the application date.

Question 17

transfer of risk of loss

Answer 17

cost of an insured’s loss is transferred over to the insurer and spread among other insureds