Chapter 2: Field Underwriting, Application, Premiums, Receipts

Question 1

Who performs the field underwriting?

Answer 1

The agent

Question 2

What is the purpose of field underwring?

Answer 2

To reduce adverse selection

Question 3

Upon policy delivery, agents must deliver to the applicant the life insurance….?

Answer 3

Buyers guide (general info about types of life insurance poilicies) and Policy Summary (specific info about the policy purchased, including premium and benefits)

Question 4

TF: If Tim decides to take out insurance on his wife Suzanne, both Tim and Suzanne must sign the application – as well as the agent.

Answer 4

True

Question 5

If an agent notices a minor error on the application, the __________ should correct it in the presence of the ______, then the ______ should initial the change.

Answer 5

Agent, APplicant, APplicant

Question 6

T:F:Agents should make every effort to collect the initial premium with the application.

Answer 6

True

Question 7

Two types of premium receipts?

Answer 7

Conditional and Binding

Question 8

Two types of conditional receipts?

Answer 8

Insurability and Approval

Question 9

The agent issues a _______ receipt after the application and premium have been collected.

Answer 9

Conditional

Question 10

The __________ receipt provides interim coverage as long as the applicant is actually insurable.

Answer 10

Insurability

Question 11

The _______ receipt does not begin until the insurer approves the application.

Answer 11

Approval

Question 12

TF: If the insurer issues a counter-offer because the applicant is a substandard risk, coverage is not provided until the applicant accepts the modified coverage.

Answer 12

True

Question 13

TF: if a standard risk applicant submits an application requiring a medical exam and receives a conditional receipt for their premium, the policy effective date is the application date.

Answer 13

False - the date of the completed medical exam

Question 14

The ______ receipt provides coverage from the date of the application, regardless of whether the applicant is insurable.

Answer 14

Binding (AKA temporary insurance agreement)

Question 15

The frequency at which premium payments are made?

Answer 15

Premium Payment Mode

Question 16

What are the two policy cost comparison methods?

Answer 16

Traditional net Cost (ignores interest)
Interest adjusted net cost

Question 17

TF: Coverage is not effective:
Without collection of the initial premium,
Approval of the application, and
Policy issuance and delivery.

Answer 17

True

Question 18

Backdating, used to secure lower premiums, can only be done up to _____ months.

Answer 18

6

Question 19

Preliminary or interim term insurance may be used to defer the initial premium payment from ___ to ___ months.

Answer 19

1 to 11 months from the date of the original application.

Question 20

TF: If a conditional receipt was not issued, the agent will declare the policy effective date.

Answer 20

False; the insurer declares the date

Question 21

________ _______ occurs when the insurer hands over control of the policy to another person.

Answer 21

Constructive Delivery

Question 22

TF: The initial premium must be paid for the policy to be delivered.

Answer 22

True

Question 23

______ _______ is required when the agent needs to obtain a statement of good health from the insured upon delivery.

Answer 23

Personal Delivery

Question 24

TF: The premium must be paid before or at policy delivery.

Answer 24

True

Question 25

What may be required to verify the insured has not become ill, injured, or disabled during the policy approval process?

Answer 25

Statement of Good Health

Question 26

Why is personal delivery of the policy a good practice?

Answer 26

it allows the agent to explain the coverage to the insured, such as the riders, provisions, and options.

Question 27

TF: Life insurance document is called policy summary, health insurance calls it outline of coverage

Answer 27

True

Question 28

TF: A life insurance agent cannot use any of the following titles when conducting business:
Investment Advisor
Financial Planner
Financial Consultant

Answer 28

True

Question 29

The Do Not Call List does not apply to:

Answer 29

Political organizations,
Charities,
Telephone surveys,
Companies with an established business relationship with the consumer or
Companies that have express written consent from the consumer to call.

Question 30

The PATRIOT Act expands the definition of money laundering to include?

Answer 30

Violent crimes,
Bribery of public officials,
Fraudulent use of public funds,
Smuggling,
The illegal export or import of guns, ammunition, and other weapons not authorized in the U.S., and
Computer crimes.

Question 31

Anna applied for a $1 million life insurance policy and paid the first premium. Later she was declared uninsurable. Her agent gave her a receipt that guarantees coverage until the insurer formally rejects the application. Which type of receipt did Anna receive?
Select one:
a. Conditional
b. Insurability
c. Binding
d. Approval

Answer 31

C

Question 32

Coverage begins on the application date or date of medical exam for which of the following?
Select one:
a. Insurability receipt
b. Nonnegotiable receipt
c. Premium receipt
d. Approval receipt

Answer 32

A

Question 33

Which of the following correctly describes the penalty applied to a company for calling a person whose phone number is on the Do Not Call List?

Select one:
a. Fine in the amount of $16,000
b. Fine in the amount of $40,000
c. Fine in the amount of $100,000
d. Fine in the amount of $1,000,000

Answer 33

B

Question 34

Sam submits an application with initial premium for a life insurance policy on July 6th. The agent issues Sam a conditional receipt at this time. Sam takes the required medical exam on July 10th. The insurer approves the policy on August 1st, and the agent delivers the policy to Sam on August 10th. Which day did Sam’s coverage begin?
Select one:
a. July 6th
b. July 10th
c. August 1st
d. August 10th

Answer 34

B

Question 35

Wesley fills out an application for a life insurance policy and submits it to the agent on January 5th. He does not include the first premium payment. Wesley undergoes the required medical examination on January 7th. The insurance company approves Wesley’s application on January 15th. Wesley’s agent delivers the policy to Wesley on January 17th. At this time, Wesley writes out a check for the initial premium. On what date is Wesley’s policy effective?
Select one:
a. January 5th
b. January 7th
c. January 15th
d. January 17th

Answer 35

D

Question 36

If a premium payment has not been given with the application, the policy becomes effective only when the producer delivers the policy and:
Select one:
a. Provides a conditional receipt
b. Secures the applicant’s signed application and statement of continued good health
c. Explains its provisions, secures the initial premium, and a signed statement of continued good health
d. Explains its provisions and leaves a receipt for policy delivery

Answer 36

C

Question 37

How many months can a life insurance policy be backdated?
Select one:
a. 6 months
b. 9 months
c. 12 months
d. As many months as desired

Answer 37

A

Question 38

The agent may be required to collect a _______ from the policyowner upon policy delivery.
Select one:
a. Statement of good health
b. Conditional receipt
c. Blood test
d. Buyer’s guide

Answer 38

A

Question 39

David signs an application for a $50,000 life policy, pays the initial premium, and receives a conditional receipt. If he were killed in an automobile accident one day later:
Select one:
a. His beneficiary would receive $50,000, if the application qualified him for the policy for which he applied.
b. The insurer could reject the claim because the underwriting process had not been completed by the time of death.
c. The insurer would return the amount of the premium because the underwriting process was incomplete.
d. The insurer would pay half the policy amount if the application were approved by the underwriting department.

Answer 39

A

Question 40

Who completes field underwriting?
Select one:
a. The insurer
b. The insured
c. The agent
d. None of the above

Answer 40

C

Question 41

Margaret makes a change to her insurance application after completing it. Who must initial her change and sign the contract?

Select one:
a. Margaret
b. Margaret and the underwriter
c. Margaret and the agent
d. Margaret and an executive officer of the insurer

Answer 41

C

Question 42

All of the following correctly demonstrate policy delivery, EXCEPT:
Select one:
a. The insurance company mails the policy to the policyowner
b. The insurance agent delivers the policy in-person
c. The application is approved by the underwriter
d. The insurance company mails the policy to the insurance agent, who in turn, delivers the policy to the policyowner

Answer 42

C

Question 43

Both the producer and the ___________ are required to sign the insurance application.
Select one:
a. Insured
b. Applicant
c. Beneficiary
d. All of the above

Answer 43

B

Question 44

Marge and Ben purchase an insurance policy to cover their family. Who is required to sign the application?

Select one:
a. Marge, Ben, and each child insured
b. Only Marge
c. Only Ben
d. Marge and Ben

Answer 44

D

Question 45

According to the U.S. PATRIOT Act, which of the following is money laundering?
Select one:
a. Fraudulent use of public funds
b. Computer crimes
c. Illegal exportation of controlled munitions
d. All of the above

Answer 45

D