Chapter 1 Flashcards
Insurance is the transfer of
Risk
Loss
hazard
Peril
Risk
Which is not an essential element of ins contract
Agreement
Legal purpose
Counteroffer
Consideration
Counteroffer
Ins contract must contain all except
Beneficiary’s consent
Offer and acceptance
Consideration
Competent parties
Beneficiary’s consent
What do indi9viduals use to transfer risk of loss to larger group
Exposure
Indemnity
Ins
Ins interest
Insurance
Which is not the consideration in a policy
Something of value exchanged
Premium amount paid at time of app
Promise to pay covered losses
App given to prospective insured
App given to prospective insured
In forming ins contract when does acceptance usually occur
When insurer recs app
When insured submits app
When insurer’s underwriter approves coverage
When an insurer delivers policy
When insurer’s underwriter approves coverage
Which best describes aleatory nature of insurance contract
Exchange of unequal values
Only one of the parties being legally bound by contract
Ambiguities are interpreted in favor of insured
Polices are submitted to insurer on take it or leave it basis
Exchange of unequal values
Insurer neglects to pay legit claim that’s covered under terms of policy. Which insurance principle has insurer violated
Good faith
Representation
Adhesion
Consideration
Consideration
Ins policies are not drawn up through negotiations and an insured has little to say about its provisions. What contract characteristic does this describe
Adhesion
Unilateral
Conditional
Personal
Adhesion
Pays 100 premium every month for his ins coverage, yet the insurer promises to pay 10000 for a covered loss. What characteristic of ins contract does this describe
Conditional
aleatory
Good health
Aleatory
Life ins policy has a legal purpose if both of which of following elements exist
Insurable interest and consent
Underwriting and reciprocity
Offer and counteroffer
Insurable interest and consent
Which best describes concept of paying large amount of risk on part of ins company insured pay small amount of premium
Aleatory
Adhesion
Subrogation
Aleatory
Which of the following would qualify as competent party in ins contract
Applicant has prior felony conviction
Applicant is intoxicated at time of app
Applicant is 12
Applicant is under influence of mind impairing meds
Felony conviction
Def of unilateral contract
One sided only one party makes an enforceable promise
Two or more go into contract knowing may be unequal exchange of value
One author: company wrote contract insured must accept as written
If one party makes condition other party can counteroffer
One sided only one party makes enforceable promise
Insured not legally bound to any particular action in ins contract but insurer is legally obligated to pay losses covered by policy
Aleatory
Conditional
Unilateral
Unilateral
If only one party to ins contract made enforceable promise
Adhesion
Conditional
Legal but unethical
Unilateral
Unilateral
Ins contract requires both parties meet certain conditions in order for contract to be enforceable
Unilateral
Conditional
Contingent
Aleatory
Conditional
Untrue statements on app unintentionally made by insureds that would alter decision of ins company
Warranties
Common errors
Material misrepresentations
Fraudulent statements
Material misrepresentations
All info about app is identified in general info section of life ins app except
Age
Gender
Occupation
Education
Education
Basic source in selection
App
Agents report
Warranty
Application
Contains info regarding cause of death of applicant’s deceased relatives
Medical information part 2
Guaranteed to be true or breach ins contract
Warranty
Concealment
Indemnity
Warranty
Not included in general information section of app for ins
Medical background
Gender
Occupation
Medical background
Wild underwriter not responsible for
Solicit business that will fall within insurer’s underwriting guidelines
Obtain appropriate signatures on app for ins
Issue policy that is requested
Help prevent adverse selection
Issue policy that is requested
Part two of app for life ins provides questions regarding all except
Recent surgeries
Other ins coverages
Family health history
Alcohol and tobacco consumption
Other ins coverages
Agent fails to obtain applicant’s signature on app
Send app to insurer with note explaining absence of signature
Return app to applicant for signature
Sign application for applicant
Sign application stating it was by agent
Return for signature
As field underwriter producer responsible for all except
Issue policy
Obtain signatures on app for ins
Help prevent adverse selection
Issue policy requested
When agent collects initial premium from applicant agent should issue
Statement of good health
Warranty
Premium receipt
Premium receipt
Earliest policy may go into effect
First premium is paid
Insurer approves app
App is signed and check given to agent
App signed and check given to agent
Applied for policy and paid initial premium
Insurer issued a conditional receipt
Five days later applicant had to submit to medical exam
What is effective date
Date of issue
Date of application
Date of medical exam
Date of policy delivery
Date of medical exam
Receives conditional receipt but dies before policy is issued, insurer will
Not pay policy under any circ
Automatically pay proceeds
Pay policy only if it would have issued the policy
Pay policy only if it would have issued the policy
Applied for ins and paid initial premium on aug 14
Issued a conditional rec
During underwriting process ins company found no reason to reject risk or classify it other than as standard
Killed in accident 22nd before issued
Issue policy anyway and pay face value
Negotiate reduced settlement
Keep premium to y’s estate since has no obligation to pay
Issue policy anyway and pay face value to beneficiary
Purpose of conditional rec
Guarantees policy issued in amount applied for
Serves as proof that app has been determined insurable
Given to apps who fully prepay the premium
Intended to provide coverage on date prior to policy issue
Intended to provide coverage on date prior to policy issue
Agent known as field underwriter bc of info agent gathers for insurer to
Reduce number of staff underwriters
Comply with state law
Pre select applicants that would present lowest risk of loss for insurer
Preselect applicants that would present the lowest risk of loss for insurer
When must insurable interest exist in life ins policy
Time of app
At time of policy delivery
When change of beneficiary
Time of loss
Time of application
Which is not example of valid insurable interest
Debit in life of creditor
Business partners in each other’s lives
Employer in key employees life
Child in parents lives
Debtor in life of creditor
Insurer receives a report regarding a potential insured that includes insured’s financial status hobbies habits
Medical info bureau report
Agent report
Underwriter’s report
Inspection report
Inspection report
Who is responsible for final risk selection
Underwriters
Executive officers
Accountants
Producers agents
Underwriters
Under fair credit reporting act if consumer challenges accuracy of info contained in consumer or investigative report reporting agency must
Change report
Sean actually copy of entire report to consumer
Respond to consumer’s complaint
Defend report if agency feels it is accurate
Respond to consumer’s complaint
Which of following reports will provide the underwriter with info about ins applicant’s credit
Consumer report
Inspection report
Agent’s report
Any federal report
Consumer report
If consumer challenges the accuracy of info contained in consumer or investigative report reporting agency must
Change report
Send certified copy of report to consumer
Respond to consumers complaint
Respond to consumer’s complaint
Federal fair credit reporting act
Protects customer privacy
Regulates telemarketing
Regulates consumer reports
Regulates consumer reports
Ho makes up medical information bureau
Insurers
Hospitals
Former insured
Insurers
Maximum penalty for habitual willful noncompliance with fair credit reporting act
2500
1000
Revocation of license
2500
How long does insurer have to notify consumer that consumer report will be obtained
3 days
4 days
5 days
Three days
Applicant who receives preferred risk classification qualifies for
Higher premiums than one with standard risk
Lower premiums than one with standard risk
Dividends payable for lack of claims
Higher premiums than one with substandard risk
Lower premiums than person who receives a standard risk
Describes standard risk classification in same age group with similar lifestyles
Standard risk is representative of majority of ppl
Standard risk pays higher premium
Standard risk requires extra rating
Standard risk is representative of majority of people
Results in highest premium
Substandard risk
Standard risk
Preferred risk
All risks pay equal premiums
Substandard risk
Stranger originated life ins policies are in direct opposition to principal of
Good faith
Insurable interest
Indemnity
Law of large numbers
Insurable interest
In classifying a risk home office underwriting department will look at all except
Past medical history
Present physical condition
Present occupation
Past income
Past income
Best details underwriting process for life ins
Issuance of policies
Reporting and rejection of risks
Selection classification and rating of risks
Selection classification and rating of risks
Investor buys life policy on elderly person in order to sell it for a life settlement
Visit cal settlement
Third party ownership
STOLI policy
Prearranged funeral plan
STOLI stranger originated life insurance
Another name for substandard risk classification is
Controlled
Declinedelevated
Rated
Rated
Specific info about policy
Policy summary
Illustrations
Buyers guide
Policy summary
Agent and applicant for policy fill out and sign app. Applicant does not wish to give initial premium and no conditional rec is issued. When is coverage
On app date
When agent submits app to company and when company issues a conditional receipt
When agent delivers policy collects initial premium and applicant completes an acceptable statement of good health
When the agent delivers the policy collects the initial premium and applicant completes an acceptable statement of good health
Explains life ins in general terms in order to assist applicant in process
Buyers guide
Insurance index
Policy summary
Buyers guide
Included in policy summary
Primary and secondary beneficiary designations
Copies of illustrations and app
Premiums amounts and surrender values
Premium amounts and surrender values
High documents delivered to policyowner includes info about premium accts cash values surrender values and death benefits for specific policy years
Buyers guide
Policy summary
Notice regarding replacement
Privacy notice
Policy summary
One frame for filing relevant suspicious activity reports
30 days of initial discovery
30 days of suspicious transaction
90 days of initial discovery
30 days of initial discovery
If policy includes a free look period of at least 10 days the buyers guide may be delivered to applicant no later than
Within 30 days after first premium payment was collected
Prior to filling out an app for insurance
With the policy
With the policy
