Chapter 3 - Underwriting Life & Health Insurance

Question 1

If only 5% of a company’s employees choose insurance coverage, this presents what type of issue?
A. an adverse selection issue
B. a premium mode issue

Answer 1

a. an adverse selection issue

Question 2

Each of the following may be a reason for denying a policy EXCEPT:
 A. age
 B. sex (gender)
 C. occupation
 D. health

Answer 2

b. sex (gender)

Question 3

Which of the following premium modes will result in the least total dollar outlay over the life of the policy?
 A. Monthly
 B. Annual
 C. Weekly
 D. Quarterly

Answer 3

b. Annual

Question 4

Which of the following helps underwriters predict the likelihood of death?
A. A morbidity table
B. A mortality table

Answer 4

b. A mortality table

Question 5

The premium mode which results in the greatest cost savings over the life of the policy is:
 A. Monthly Premium
 B. Quarterly Premium
 C. Annual Premium
 D. Weekly Premium

Answer 5

c. Annual Premium

Question 6

Premium mode refers to the:
A. Method by which the Producer sends the payment to the Insurer.
B. Frequency of premium payment.
C. Amount of time before the policy will terminate due to nonpayment of premium.
D. Amount of the premium payment.

Answer 6

b. Frequency of premium payment.

Question 7

The formula used to determine a premium includes each of the following elements EXCEPT:
 A. Interest
 B. Liquidity
 C. Risk
 D. Expense

Answer 7

b. Liquidity

Question 8

The section of the application providing the Producer’s evaluation of the applicant is known as the:
 A. Credit Report
 B. Agent’s Observational
 C. Agent’s Report
 D. Character Report

Answer 8

c. Agent’s Report

Question 9

Underwriting involves each of the following activities EXCEPT:
A. Reviewing applicant information.
B. Placing an applicant in the appropriate rate group.
C. Predicting future losses.
D. Carefully investing premium dollars to achieve returns.

Answer 9

d. Carefully investing premium dollars to achieve returns.

Question 10

Molly changes her premium mode so that she makes her premium payments more frequently. Will this make her insurance more or less expensive each year?
A. Less expensive
B. More expensive

Answer 10

b. More expensive

Question 11

The process of selecting and classifying risks is called:
A. Underwriting.
B. Categorizing.

Answer 11

a. Underwriting.

Question 12

The primary source of insurability information is:
 A. The federal government.
 B. The consumer credit report.
 C. The application.
 D. The consumer investigative report.

Answer 12

c. The application.

Question 13

Each of the following is a factor in calculating gross premium EXCEPT:
 A. Expenses.
 B. Interest.
 C. Risk.
 D. Dividends.

Answer 13

d. Dividends.

Question 14

If an applicant is not offered a policy after the underwriting process, he or she is referred to as a/an:
 A. Preferred risk.
 B. Uninsurable.
 C. Substandard risk.
 D. Declined risk.

Answer 14

d. Declined risk.