Chapter 3 Flashcards
Name the receipt that provides coverage “as long as a specific condition has been met or performed.”
A conditional receipt
How does the Percentage of Normal Rate method work?
By simply increasing the premium by a percentage of the standard rate
If proven untrue, may information obtained through a credit check be used to deny an application?
Untrue information obtained through a credit check may not be used to deny an application.
If requested by an applicant, what credit information must be provided to the applicant?
The information report, the source of information, and how to challenge the information.
A _________ party contract requires three signatures.
Third
What does the delivery of a policy to an insured constitute?
Policy issue and acceptance
What is another name for an average or ordinary risk?
Standard risk
When does coverage begin if a policy has a conditional receipt based upon insurability?
Coverage begins on the receipt date provided the application is approved as applied for.
What individual has better than average risk?
A preferred risk
What is the rating method that increases premiums by increasing the age classification of the insured?
The step-up-in-age rating method
List some approved policy delivery methods.
Certified registered mail, first class mail with signed receipt, and personal delivery
When is a Trial Application used?
When an application is submitted to the insurer without an initial premium
When may changes to an application be made?
Changes may only be made prior to application submission.
What are Representations?
Statements made by an applicant when answering questions on the application
A ____________ application requires no information other than what is provided by the applicant.
Nonmedical
T/F: An agent may not make changes to a life insurance application.
T; Technically, only the applicant may make changes, and only prior to the application being submitted
What type of receipt provides coverage only on the date the application is approved?
An approval type conditional receipt
When should the agent review and collect signature on a Notice Regarding Replacement form?
No later than time of application
At policy delivery, what should the agent review with the insured?
Coverage, coverage effective date, provisions, beneficiaries, premium, exclusions, riders and ownership rights
Who is the field underwriting agent?
The agent who determines which risks are desirable and submits them to the underwriting department for approval
The MIB is an inter company ________ bank that stores information collected from previous ___________.
Data; applications
If a conditional receipt requires the applicant to take a medical exam, when is the earliest date coverage may begin?
The date of the exam itself
When should an agent review the possibility of various background checks such as credit, MIB, or HIV?
At time of original application
An insurability type conditional receipt, dated 6/15, is approved as applied for on 9/1. When did coverage begin?
6/15. With conditional type receipt, coverage is effective on date of application if policy is issued as applied for.
Whenever a premium is paid by an applicant, the agent should provide a _________.
Receipt
An approval type conditional receipt, dated 6/15, is approved on 9/1 as applied for. When did coverage become effective?
On 9/1, the date the policy is approved
Name some items that effect policy premium.
Age, gender, health, occupation, hobbies, habits, family health, and travel outside of country
What is the primary source of underwriting information?
The original application
What is the principal tool used in determining an individuals eligibility for insurance coverage?
The application
Define the term warranty.
A statement made by an applicant that is guaranteed to be absolutely true
In order to represent an insurer, an agent must be __________ by that company.
Appointed
What are some of the negative results of submitting an incomplete application?
It’s unprofessional, creates issuance delays, and may result in business lost to competitors or in lost commissions
Identify the acronym: APS
Attending Physicians Statement
What does the Fair Credit Reporting Act allow?
It gives a consumer or applicant the right to dispute credit reporting information
Which would have a lower premium, a standard or substandard risk?
A standard risk would have a lower premium
When does coverage begin on a conditional receipt policy?
If the application is approved as applied for, coverage is immediately provided
What information may be found in Section 1 of a life insurance policy?
Name, address, DOB, salary, and occupation of the applicant
T/F: Women statistically live longer than men; therefore, they have lower life insurance premiums.
T
What is the purpose of the MIB?
To compare collected health information in order to avoid adverse selection
An applicant’s health history is usually found in _________ of a life insurance policy.
Section 2
Who pays for the cost of an applicant’s medical exams and lab fees?
The insurer underwriting the application
T/F: Anyone may gain access to MIB information.
F; Access is only available to approved company representatives/underwriters
Who is a substandard risk?
An individual with higher than average risk
Where would an agent record personal observations regarding the applicant?
In the agent report
When must the applicant be notified that consumer/credit background checks will be performed?
Within three days following a request for information
What methods are used to insure a substandard risk?
Higher premium, exclusion rider, lower benefit, and lower benefit time frame
Is signed authorization required from the applicant in order to test for the HIV virus?
Yes
Is coverage provided during the grace period?
Yes
What is a declined risk?
An application for insurance that has been turned down
What is a binding receipt?
One that provides immediate or unconditional coverage on the date the premium is received
For applications submitted without premium, applicants must pay premium and complete a _________________.
Statement Regarding Good Health
What tables predict the probability of death?
Mortality tables
What is the most common method used to insure a substandard risk?
Charging higher premiums
When does the “Notice to the Applicant” regarding the Fair Credit Reporting Act need to be given?
At the time of application
T/F: The producer issues the insurance policy.
F; Producers solicit appointments, complete applications, collect premiums, and submit applications for approval
What is a morbidity table?
A table used to predict the probability of illness or disability
What provision begins on the date a policy is delivered to an insured?
The free-look provision
The date listed on a receipt will always be a date that is __________ than the policy issue date.
Earlier
What are the primary duties of an underwriter?
Assess risk, approve or deny applications, determine premiums, and protect the insurer against adverse selection
