Application, Underwriting & Delivering The Policy Flashcards
What is an insurance policy? 
A contract in which the insurance company agrees to indemnify the insured party against loss damage or liability from an unknown event. Based on the principle of indemnity, and based on the spreading of risk (risk pooling ) and the law of large.
In a life insurance policy, when must insurable interest exist? 
Upon application date 
What are the four elements of an insurance contract? 
- agreement - offer & acceptance
- consideration - premiums and representations on the part of the insured. Payment of claims on the part of the insured.
- competent parties - of legal age sound mental capacity, and not under the influence of drugs or alcohol.
- legal purposes - not against public policy
What does representation mean? 
Statements believed to be true to the best of one’s knowledge, but they are not guaranteed to be true
What does warranty mean? 
Absolutely true statements upon which the Valatie of the insurance policy depend
What does insurance solicitation mean? 
Solicitation of insurance means an attempt to persuade a person to buy an insurance policy, and it can be done orally or in writing 
What information does a buyers guide provide? 
It provides basic generic information about life insurance policies that contains and is limited to language permit approved by the division of insurance. It explains how a buyer should go about using the amount and type of insurance to buy and how a buyer can save money by comparing the cost of similar policies.
What is underwriting? 
Underwriting is the risk selection and classification process. It involves careful analysis of many different factors determine the acceptability of applicants for insurance.
What information is gathered in parts one and two of the application? 
Part one contains general information and part two contains medical information
What is the purpose of an agents report? 
The agents report contains personal observations concerning the proposed insured 
Who is required to sign an application for life insurance? 
Both the agent and the proposed insured must sign the application 
When does an insurance policy go in effect? 
Affective either on the date of application, or the date of medical exam 
How can an insurance company use the information obtained from the MIB?
The MIB can only be used as an aid in helping ensures know what areas of impairment they might need to investigate further 
What is the purpose of the fair credit reporting act? 
To protect consumers against the circulation of inaccurate, or obsolete, personal or financial information 
What is the difference between a consumer report and an investigative consumer report? 
Consumer reports include written or oral information regarding a consumers credit, character, reputation or habits, collected by a reporting agency from employment records, credit report, or other public sources. What is that as investigative consumer reports are very similar to consumer reports, but they also provide information on the consumers character, reputation inhabits the primary difference is that the information is obtained through an investigation and interviews with associates, friends, and neighbors of the consumer 
How does a substandard risk policy differ from a standard risk? 
Standard risks are persons who, according to a company’s underwriting standards are entitled to insurance protection, without extra rating or special restrictions, and our representatives of the majority of people at their age with similar lifestyles. As substandard risk applicants are not acceptable at standard rate because of physical condition, personal or family, history of disease, occupation, or dangerous habits. 
What are three factors that determine the premium for a particular policy? 
Risk (mortality - rate of death within a specific group ),  interest, and expense
When would an insured be required to sign a statement of good health?
Once the initial premium has been paid. Policy does not go into effect till the premium has been collected. It verifies that the insured has not suffered injury or I’ll rss since the application date.
Adverse selection
Insuring of risks that are more prone to losses in the average risk
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 or proposed insured
A person applying for insurance
Beneficiary
A person who receives the benefits of an insurance policy 
Death benefit 
The amount paid upon the death of the insured in a life insurance policy
Insured
A person covered by the insurance policy that may or may not be the policy owner 
Insurer
The company who issued an insurance policy 
Lapse
Policy termination due to nonpayment of premium 
Life insurance 
Coverage on human lives 
Policy owner
The person entitled to exercise the rights and privileges in the policy 
Premium
The money paid to the insurance company for the insurance policy 
Insurable interest covers who? 
Ensuring one’s own life, family, member, or business partner 
What must exist at the time of application? 
Insurable interest 
What are some contract characteristics?
- Adhesion - one party prepares the contract, and the other party must accept it as is.
- Aleatory - exchange of an equal amounts.
- Conditional - certain conditions must be met.
- Unilateral - only one of the parties to the contract is legally bound to do anything.
Field underwriting by the agent must include what?
They must include the application that has been completed and signed, the agents report and premiums with application and conditional receipts
Company underwriting must have multiple sources of information that include?
They must include the application, consumer reports and MIB
What are the three types of risk classifications under company underwriting? 
standard, substandard and preferred
What does FCRA a stand for?
Fair credit reporting act, and it protects consumers against circulation of inaccurate or obsolete information.
USA patriot act/ anti-money, laundering and suspicious activity report rules
To address social, economic, and global initiatives to fight and prevent terrorist activities. The financial crime enforcement network requires banks, broker, dealers, and other financial institutions to establish new anti-mothering laundering standards, and requires a monitoring of all financial transactions, and reporting of any suspicious activity to the government, along with prohibiting corresponding accounts with foreign shell banks. 
What are the three key factors for life insurance?
Mortality, interest, and expense 
Mode 
The more frequently premium is paid, the higher the premium is. 
When should the policy be issued and delivered?
By the effective date of coverage. If the premium is not paid with the application, the agent must obtain the premium and a statement of continued good health at the time of policy delivery. 
If no receipt is issued at the time of application, a statement of good health is usually required at the time of?
Policy delivery
The medical information bureau is?
A source of medical information to alert insurers to adverse medical history 
In an insurance contract, confederation refers to?
Exchange of something of value by both parties 
Over several years, a policy owner paid $10,000 in premiums for his insurance policy. When he suffered a loss, the insurance company paid out $50,000 in benefits. What characteristic of an insurance contract does this describe?
 This describes adhesion 
 Which of the following would be the main source of underwriting information used by the company and the risk selection process?
Application 
An insured submits before premium along with a completed application, and the policy is issued 10 days later. When does this coverage begin?
On the date of application 
What is the main responsibility of a companies underwriting unit?
Risk selection and classification 
Which of the following best describes the purpose of the USA patriot act with regards to the insurance industry?
To prevent terrorism activities through monitoring of financial transactions
If the agent feels that there could be miss representation on the part of the application for insurance, what must the agent do?
Inform the insurance company
Representations are statements made by the applicant that are? 
Considered true to the best of the applicants knowledge 
If an agent fails to obtain an applicant signature on the insurance application, the agent must? 
Return the application to the applicant for signature 
What includes information regarding a persons, credit, character, reputation, and habits? 
Consumer reports 
