Chapter 3 Flashcards
An MIB contains information about
An applicants previous health history
All of the following are factors which affect a life insurance risk EXCEPT;
Unearned Income
Which of the following is true regarding the doctrine off insurable interest?
Insurable interest must exist at the time of the application.
All of the following are types of premium receipts EXCEPT
countersignature receipt
An applicant who conceals material information may be subject to which of the following?
Policy cancelation with returned premium
A life insurance underwriter receives the greatest amount of insurability information from which of the following sources?
The insurance application
Each of the following methods may be used to rate up insurance policy EXCEPT
Preferred Risk method
Which of the following receipts provides coverage immediately upon the payment of the premium?
Binding Receipt
Which of the following risk classifications is characterized by a lower annual premium?
Preferred Risk
John applies for life insurance and pays an initial premium. He is provided with insurability type of conditional receipt. The next day Johns dies in an auto accident. The insurer is notified by Johns wife the following day. What action will the insure take?
Underwrite the policy and if John is found insurable, the insure will pay the claim.
Which of the following is the primary purpose of the Medical Information Bureau?
Allows the insurer to avoid high risk applicants.
If an applicant for life insurance is considered substandard risk but still insurable, it will probably take which of the following actions?
Accept the risk and rate up the premium
An application completed were the applicant and the proposed are insured are different persons would have to be signed by which of the following?
The agent, applicant, and the proposed insured.
If a premium is not paid at the time an application for life insurance is completed, when will coverage go into effect?
When the producer delivers the policy and collects the premium.
If no premium is paid with an application for life insurance, what responsibilities does an agent possess when the policy is delivered?
Collect the premium and a statement of continued good health and issue a premium receipt.
Tom Baney applies for life insurance but pays no initial premium. The application is submitted to underwriting , is approved and a policy is issued. When the agent attempts to delivery the policy she learns that Tom is in the hospital. What should she do?
Do not delivery the policy nor collect the premium.
What are increased rating methods?
Step up in age or rate up in age.( 45 year old rated as 50 year old due to substandard risk.)
Flat extra rate
Percentage of the normal rate.( stunt Pilot substandard or high risk)
What are some producer responsibilities at delivery?
Review some of the befits of the insurance contract.
Person insured, coverage amount, effective date of coverage, policy provisions, beneficiaries and annual premiums
What are some premium factors/
Age of proposed insured, sex females pay lower premiums, health history, family health history, personal activities or hobbies, personal habits, occupation, salary earnings, traveling out the country.
What are the three different selection criteria for proposed life insurance?
Standard risk (normal premium) Substandard risk (high risk) and Preferred risk (excellent health low premiums)
Three Primary duties of an Underwriter
assess the risk, determining premiums and protecting the insurer against adverse selection.
Section II of the application contains
proposed inured health history
When producers complete an application he or she must include at least two required signatures.
Applicant and the Producer
If the producer alters or changes the application in any way without informing the applicant or insurer he or she may have committed what ?
Fraud
Is a true statement made by the applicant in response to section I & II of the application?
Representation
If a applicant makes any statement that are “guaranteed” to be true he or she has made a
Warranty
Generally provide coverage as the date of the receipt as long as specific condition is satisfied
Conditional Coverage
An application submitted with out a premium
Trial application ( Statement of good health must be submitted as well)
The producer should collect the premium from the applicant
at the time of the application
