Chapter 02

Question 1

Accident - Accidental Results

Answer 1

Requires only that the injury be unintended and unforeseen

Question 2

Accident - Accidental Means

Answer 2

Requires both the injury and the cause of the injury to be unintended and unforeseen

Question 3

Accidental Injury

Answer 3

A spontaneous event, unforeseen and unintended, resulting in injury

Question 4

Coinsurance

Answer 4

The cost sharing between the insurer and the insured stated as a percentage of the claim amount, payable after the deductible has been met

Question 5

Copayment

Answer 5

Predetermined dollar amount that applies per claim in addition to any other cost-sharing

Question 6

Deductible

Answer 6

The initial amount payable by the insured before insurance benefits apply

Question 7

Morbidity Table

Answer 7

Mathematical probability of a loss due to a sickness or injury.

Question 8

Sickness

Answer 8

An illness or disease that is contracted after the probationary period has ended

Question 9

Subrogation

Answer 9

Insurance co. covers your loss and the legal right of recovery is transferred from you to the insurer. So you can no longer go after the 3rd party

Transfers an insured’s legal right of recovery to the insurer that has paid a claim. This
prevents the insured from collecting twice for the same loss and holds the responsible
3rd party accountable for the loss

Question 10

Disability Income (Loss of Time or Income)

Answer 10

Income received due to injury or sickness if an insured is unable to perform the duties of their job. To pay living expenses, not medical expenses.
The benefit is either a percentage of the insured’s past earnings or a flat dollar amount.

Question 11

Long-Term Care Expense

Answer 11

Coverage for personal care services in a
setting other than an acute care unit of a hospital, such as a nursing home or even one’s own home.
Not in a hospital

Question 12

Accidental Death and Dismemberment: Principal Sum

Answer 12

Accidental death, loss of two eyes, loss of two limbs cover 100% of the face amount

Question 13

Accidental Death and Dismemberment: Capital Sum

Answer 13

Accidental loss of one eye or one limb, 50% of face sum.

Question 14

Home Health Care

Answer 14

Limited nursing services, home health aide, light housekeeping, and related expenses may be available in both medical expense insurance and long-term care insurance.

Question 15

Group Policies

Answer 15

Lower premiums; Employer sponsored and underwritten for the group. Employer makes all coverage decisions with mandatory coverages in place

Question 16

ERISA

Answer 16

Federal act that governs group plans

Question 17

Solicitation and Marketing Requirements

Answer 17

Must be very specific and accurate. Use companies pre-made advertising.

Question 18

Limited Benifits

Answer 18

Covers a specific type of coverage, such as cancer or heart treatments.

Question 19

Errors and Omissions

Answer 19

Professional liability insurance covering the liability of an agent.
Negligence, inadequacy, failing to obtain proper type or amount of coverage for a client.

Question 20

Who must sign an application?

Answer 20

Both the owner, or applicant, the insured, and the producer must be present and sign the application.
Guardian must sign if minor is applicant

Question 21

Field Underwriting

Answer 21

Producer gathers information for from applicant for application.

Question 22

What is the application?

Answer 22

The application is the primary source of information for an insurer underwriting a potential risk. If attached to the policy, a copy of the application becomes part of the entire contract.

Question 23

What is required in order to change info on an application?

Answer 23

applicant must initial the change, or the producer can complete a new application.

Question 24

Consequences of Incomplete Applications

Answer 24

producer’s responsibility to make certain the application is filled out completely, correctly,
and to the best of the applicant’s knowledge.

The underwriter will most likely return an incomplete application to the producer for completion by
the applicant.

If a policy is issued based on an incomplete application, it is assumed the information
is not material to the issuance and the insurer waives the right to challenge a claim based on the
incomplete application.

Question 25

Conditional Receipt is given when and does what?

Answer 25

• If a premium is paid at the time of application
• Provides coverage effective back to the date of
  application as long as coverage is issued as applied, standard or better.
• If a loss occurs before the policy is issued, the insurer would have to prove the policy would not have been issued as applied

Question 26

When does a Policy Begin With no Initial Premium?

Answer 26

Must sign statement of good health
If a producer does not collect the
initial premium and submits ONLY the application to the insurer, the policy will not go into effect
until the application has been approved, the policy has been issued, and the premium has been paid.

Question 27

HIPAA

Answer 27

• protect sensitive patient health information from being disclosed with the patient’s consent
  or knowledge.
• Insurers are required to maintain strict confidentiality of personal information obtained through
  testing and must have written consent of the applicant before testing for HIV.
• Insurance companies may refuse to issue a policy to individuals based on positive HIV test
  results.

Question 28

Underwriting Factors

Answer 28

■ Age
■ Gender
■ Tobacco use
■ Occupation and hobbies (degree of risk); if more than 1 occupation, the most hazardous will
be used
■ Physical condition
■ Moral hazard/financial hazard
■ Health history
■ Geographic location
■ Foreign travel/residence
■ Other insurance
■ Plan applied for

Question 29

Underwriting Information Sources: Part I and II

Answer 29

General and Medical

Question 30

Underwriting Information Sources: Medical Examination

Answer 30

conducted by a medical professional regarding the applicant’s present
health. This is usually requested by the insurer after determining if the amount of coverage, age
of applicant or health history warrant the examination.

Question 31

Underwriting Information Sources: Attending Physician Statement

Answer 31

Used in cases in which the individual application and/or medical reports reveal conditions of
which more information is required. This statement is completed by the applicant’s personal
physician treating a specific condition. An applicant must sign a written release to enable a
release of the APS.

Question 32

Underwriting Information Sources: Medical Information Bureau

Answer 32

• primary purpose is to collect adverse medical information about an applicant’s health
  (supported by insurance companies) and act as an information exchange.
• may help lower the cost of
  life and health insurance for consumers.
• cannot solely be used to decline an applicant for insurance.

Question 33

Underwriting Information Sources: Inspection Report

Answer 33

aka Consumer Investigative Report
* A general report of the applicant’s finances, character, morals, work, hobbies, and other habits. Interviewing people applicant knows
* The applicant must be made aware of any information gathering
and has rights provided under the FCRA.

Question 34

Agent’s Report

Answer 34

personal statement submitted by the producer to the insurer regarding any personal knowledge
of the applicant, including information observed during the application process. This information
remains confidential between the producer and the insurer, and it does not become part of the
entire contract.

Question 35

Factors in Premium Determination

Answer 35

Morbidity - Interest = (Net Premium) + Expenses = Gross Premium

Question 36

Substandard Risk:

Answer 36

Issued Rated-up: Higher premiums
are required due to the greater potential for a larger number of claims (this may be
referred to as a surcharge).
Issued with Exclusions/Limitations – May be temporary or permanent; limits the
insurer’s obligation to pay. The rider used to exclude coverage for existing conditions
is sometimes referred to as an Impairment Rider.

Question 37

Replacement of Policy

Answer 37

old policy should not be canceled before the new policy
is issued, otherwise this could leave the applicant without coverage.
The new policy may require
underwriting to prove evidence of insurability, which can affect the coverage and premiums of
the new policy.