Chapter 5

Question 1

The provision that allows changing a term policy to a permanent policy without additional medical requirements is a:

Answer 1

term conversion

Question 2

A policy rider allowing defined increments of additional insurance to be purchased at set future intervals without underwriting evidence is:

Answer 2

guaranteed insurability

Question 3

Post-issue policy changes that typically require underwriting review include:

Answer 3

requests for rating reductions

Question 4

Factors when considering reinstatement (8)

Answer 4

1. Whether or not the policy was facultatively reinsured
2. Policy face amount
3. current policy values
4. age of the proposed insured
5. duration policy has been in force
6. duration it has been lapsed
7. whether or not there have been prior lapses and reinstatements of this same policy
8. disclosed health history on the reinstatement application

Question 5

How underwriters add value to the policy change process:

Answer 5

1. Underwriter impacts the bottom-line performance of the company by placing business on the books from which the company will derive a profit or loss (evaluating mortality risk)
2. How underwriters handle a policy can affect how policyholders and producers view the company. (customers service)

Question 6

Contestability peroid

Answer 6

Usually 2 years, during which the validity of the policy contract can be contested by the insurer for material misrepresentations.

Question 7

Material Misrepresentations

Answer 7

Statements made that are false which, had the truth been disclosed, would have resulted in a less favorable risk class than was issued.

Question 8

1035 Internal Exchanges

Answer 8

In the United States, The IRS allows you to exchange an insurance policy that you own for a new life insurance policy insuring the same person without paying tax on the investment gains earned on the original contract.

Question 9

Re-entries

Answer 9

term insurance policies that have reached the end of their period of specified coverage and are being considered for renewal.

Question 10

Conversions

Answer 10

A provision which allows the conversion of a term policy to a permanent product without evidence of insurability if requested within a set time frame.

Question 11

Reinstatement

Answer 11

the process by which a life insurance company puts back in force a life insurance policy that has either been terminated because of nonpayment or been continued under the extended term or reduced paid up insurance non forfeiture option

Question 12

Tools used by the underwriter in determining insurability when considering a policy change (7)

Answer 12

1. MIB
2. non medical health questionnaire
3. Paramed exam
4. blood profile
5. urine specimen
6. Rx search history
7. Medical records

Question 13

The adverse impact upon insurers that occurs when insureds select insurance coverage for only those risks that are likely to generate losses.

Answer 13

Anti-selection

Question 14

When underwriting a rate reduction the economic incentive is to:

A: Keep requirements to a minimum
B: Order more requirements

Answer 14

A: Keep requirements to a minimum

remember in the case of a rate reduction this will not be “new premium added to the books”