Chapter 1: Underwriting Questions

Question 1

When a change needs to be made on the application for insurance, which is the best method for correcting the information?

Answer 1

Complete a new application or ask the applicant to initial the correction on the original application

Question 2

What is the best way to handle incomplete insurance applications?

Answer 2

Return the application to the applicant for completion

Question 3

What is the main responsibility of a company’s underwriting unit?

Answer 3

Risk selection

Question 4

What do individuals use to transfer their risk of loss to a larger group?

Answer 4

Insurance

Question 5

Insurance contracts are unilateral. What does that mean?

Answer 5

Only one party makes a legally enforceable promise.

Question 6

What are the three types of risk rating classifications in life insurance?

Answer 6

Standard, substandard and preferred

Question 7

What is adverse selection?

Answer 7

People who are more likely to submit insurance claims are seeking insurance more often than preferred risks.

Question 8

When would a misrepresentation on an insurance application be considered fraud?

Answer 8

When it is intentional and material

Question 9

When would a misrepresentation be considered material?

Answer 9

When it may alter the underwriting decision

Question 10

Insurance is a contract that protects the insured from what?

Answer 10

Loss

Question 11

Whose responsibility is it to determine that all the questions on an insurance application are answered?

Answer 11

The agent’s

Question 12

When must the policy summary for a life insurance policy be delivered to the policyowner?

Answer 12

At the time of policy delivery

Question 13

What law protects consumers from the circulation of inaccurate or obsolete information?

Answer 13

The Fair Credit Reporting Act

Question 14

What is policy replacement?

Answer 14

A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value

Question 15

If an applicant does not receive a copy of the new insurance policy, who would be held responsible?

Answer 15

The agent

Question 16

What is the name of the process that insurance companies use to determine whether or not an applicant is insurable?

Answer 16

Underwriting

Question 17

What are the three main instances when insurable interest exists in life insurance?

Answer 17

Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial obligation to the policyowner

Question 18

Who must have insurable interest in the insured?

Answer 18

The policyowner

Question 19

How may insurance policies be delivered to insureds?

Answer 19

They may be either personally delivered by an agent or mailed.

Question 20

How is the information obtained for an investigative consumer report?

Answer 20

Through interviews with the applicant’s associates, friends and neighbors

Question 21

What two elements are necessary for a life insurance contract to have a legal purpose?

Answer 21

Insurable interest and consent

Question 22

If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?

Answer 22

Provide the applicant a Disclosure Authorization Notice

Question 23

When does an insurance policy go into effect?

Answer 23

When the policy is delivered and the premium is paid

Question 24

What document describes the specific information about a policy?

Answer 24

Policy summary

Question 25

What risk classification would typically qualify for lower premiums?

Answer 25

Preferred risk

Question 26

In forming an insurance contract, when does an acceptance usually occur?

Answer 26

When the insurer approves a prepaid application

Question 27

Insurance contracts are prepared by insurers and must be accepted by the insured on an as-is basis. This describes what characteristic of an insurance contract?

Answer 27

Contract of adhesion

Question 28

What is a warranty in an insurance contract?

Answer 28

An absolutely true statement upon which the validity of the insurance contract is based

Question 29

What type of report may be used to assess risks associated with an applicant’s lifestyle and character?

Answer 29

Investigative Consumer Report

Question 30

Who is a field underwriter?

Answer 30

Agent/Producer

Question 31

At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?

Answer 31

Either on the date of the application or the date of the medical exam (whichever occurs last)

Question 32

When must insurable interest exist in a life insurance policy?

Answer 32

At the time of application

Question 33

What is the purpose of the agent’s report during the application process?

Answer 33

The agent’s report discusses the agent’s personal observations about the proposed insured that may help in the underwriting process.

Question 34

What term describes the fee a person pays an insurance company to receive coverage?

Answer 34

Premium

Question 35

What entities make up the Medical Information Bureau?

Answer 35

Insurers

Question 36

What type of report provides information about the applicant’s hobbies, habits and financial status?

Answer 36

Investigative consumer report

Question 37

If an agent fails to obtain the applicant’s signature on the insurance application, what must the insurer do?

Answer 37

Send the application back to the applicant for signature

Question 38

In insurance contracts, the insured is not legally bound to any particular action; however, the insurer is obligated to pay for losses covered by the policy. What contract element does this describe?

Answer 38

Unilateral

Question 39

What are the four elements of an insurance contract?

Answer 39

Agreement (offer and acceptance), consideration, competent parties, and legal purpose

Question 40

If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter’s main concern?

Answer 40

The existence of insurable interest between the applicant and the insured

Question 41

In insurance, when is the offer usually made on a contract?

Answer 41

When the insurance application is submitted

Question 42

What is insurance underwriting?

Answer 42

The process of risk selection and classification

Question 43

During which stage in the insurance process do insurers evaluate information that identifies adverse selection risks?

Answer 43

Underwriting