Completing the Application, Underwriting, and Delivering the Policy

Question 1

Insurance is a _______ of risk of loss from an individual or a business entity to an
insurance company

Answer 1

Transfer

Question 2

What is a contract?

Answer 2

A contract is an agreement between two or more parties enforceable by law

Question 3

What are the 4 elements an insurance contract MUST have to be legally binding?

Answer 3

1. Agreement — offer and acceptance;
2. Consideration;
3. Competent parties; and
4. Legal purpose.

Question 4

In insurance when is an offer made? And by whom?

Answer 4

the applicant usually makes the offer when

submitting the application

Question 5

When does acceptance take place?

Answer 5

Acceptance takes place when an insurer’s underwriter

approves the application and issues a policy

Question 6

What is consideration?

Answer 6

Consideration is something

of value that each party gives to the other

Question 7

What is the consideration on part of the insured?

Answer 7

the payment of premium and the representations made in the

application

Question 8

What is the consideration on part of the insurer?

Answer 8

the promise to pay in

the event of loss

Question 9

What are competent parties?

Answer 9

must be capable of entering into a contract in the eyes
of the law. Generally, this requires that both parties be of legal age, mentally
competent to understand the contract, and not under the influence of drugs or
alcohol.

Question 10

What is needed for a life insurance policy to have legal purpose?

Answer 10

insurable

interest and consent

Question 11

What is a contract that is prepared by the insurer accepted or rejected by the other party?

Answer 11

contract of adhesion

Question 12

A contract in which there is an exchange of unequal amounts or values is?

Answer 12

Aleatory contract

Question 13

In what type of contract is only one of the parties legally bound to do anything?

Answer 13

Unilateral Contract-The insured makes no legally binding promises. However, an insurer
is legally bound to pay losses covered by a policy in force

Question 14

What is a conditional contract?

Answer 14

a conditional contract requires that certain conditions must
be met by the policyowner and the company in order for the contract to be
executed, and before each party fulfills its obligations

Question 15

What is a warranty?

Answer 15

an absolutely true statement upon which the validity of the
insurance policy depends. Breach of warranties can be considered grounds for
voiding the policy or a return of premium. Because of such a strict definition,
statements made by applicants for life and health insurance policies, for
example, are usually not considered warranties, except in cases of fraud.

Question 16

What are representations?

Answer 16

statements believed to be true to the best of one’s
knowledge, but they are not guaranteed to be true. For insurance purposes,
representations are the answers the insured gives to the questions on the
insurance application.

Question 17

Untrue statements on the application are considered _____ and could void the contract.

Answer 17

Misrepresentations

Question 18

A statement that if discovered, would alter the underwriting decision of the insurance company are?

Answer 18

Material Misrepresentations

Question 19

If a material misrepresentation is intentional this is considered what?

Answer 19

Fraud

Question 20

What is the starting point and basic source of information used by the company in the risk selection process?

Answer 20

The Application

Question 21

What are the basic components that make up the application?

Answer 21

Part 1 - General Information Part 2 - Medical Information

Question 22

What part of the application will contain the name, age, address, birth date, gender, income,
marital status, and occupation? It will also inquire about the existing policies and if
the proposed insurance will replace them

Answer 22

General Information

Question 23

Medical information is?

Answer 23

prospective insured’s medical background, present health, any medical visits in
recent years, medical status of living relatives, and causes of death of deceased
relatives

Question 24

Whose responsibility is it to make certain that the application is filled out completely, correctly, and to the best of the applicant’s knowledge?

Answer 24

The Agent’s

Question 25

Who is the field underwriter?

Answer 25

the agent/producer

Question 26

What is the purpose of the agent's(producer's) report?

Answer 26

t provides the agent's personal observations concerning the proposed insured. The insurer may inquire whether the agent knows of any adverse information about the applicant, or ask the agent to express an opinion about the applicant's character, financial standing, and environment.

Question 27

When an answer to a question on the application needs to be corrected, agents have what two options?

Answer 27

correcting the information and having the applicant initial the change, or completing a new application. An agent should never erase or white out any information on an application for insurance.

Question 28

What should an insurer do if they receive an incomplete application?

Answer 28

the insurer must return it to | the applicant for completion

Question 29

What happens If a policy is issued with questions left unanswered?

Answer 29

the contract will be interpreted as if the insurer waived its right to have an answer to the question. The insurer will not have the right to deny coverage based on any information that the unanswered question might have contained.

Question 30

What is a conditional receipt?

Answer 30

A receipt used only when an applicant submits a prepaid application. The conditional receipt says that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, as long as the applicant is found to be insurable as a standard risk, and policy is issued exactly as applied for. Intended to provide proof of coverage on a date prior to when policy was received.

Question 31

If an agent collects the initial premium from an applicant and gives the applicant a conditional receipt, and the applicant dies the next day what will happen?

Answer 31

, the underwriting process will proceed as though the applicant were still alive. If the insurer ends up approving the coverage, then the applicant's beneficiary will receive the death benefit of the policy. If, on the other hand, the insurer determines that the applicant was not an acceptable risk and declines the coverage, the premium will be refunded to the beneficiary, and the insurer is not required to pay the death benefit.

Question 32

________ is a practice of terminating an existing policy or letting it lapse, and obtaining a new one

Answer 32

Replacement

Question 33

the risk and selection process is known as what?

Answer 33

Underwriting

Question 34

What is underwriting?

Answer 34

the process in which an insurance company determines whether or not a particular applicant is insurable, and if so, what premium to charge.

Question 35

What is insurable interest?

Answer 35

the policyowner must face the possibility of losing money | or something of value in the event of loss

Question 36

When must insurable interest exist in life insurance? and between whom?

Answer 36

at the time of application | the policyowner and the insured

Question 37

what are the 3 instances of insurable interest in life insurance?

Answer 37

1. Policyowner's own life; 2. The life of a family member (a spouse or a close blood relative); or 3. The life of a business partner, key employee, or someone who has a financial obligation to the policyowner (such as debtor to a creditor)

Question 38

What is the main source of underwriting information for the company?

Answer 38

application

Question 39

_________ allows the agent to communicate with the underwriter and provide information about the applicant known by the agent that may assist in the underwriting process.

Answer 39

Agent's Report

Question 40

what law was it that established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used and also protects consumers against the circulation of inaccurate or obsolete personal or financial information?

Answer 40

Fair Credit Reporting Act

Question 41

________ include written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources

Answer 41

Consumer reports

Question 42

How is the information attained for an Investigative consumer report?

Answer 42

the information is obtained through an investigation and | interviews with associates, friends and neighbors of the consumer

Question 43

Which reports cannot be made unless the consumer is advised | in writing about the report within 3 days of the date the report was requested?

Answer 43

Investigative Consumer reports

Question 44

The consumers must be advised that they have a right to request additional information concerning the report, and the insurer or reporting agency has _ days to provide the consumer with the additional information.

Answer 44

5

Question 45

A person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses may also be fined up to _____ and/or imprisoned for up to _______

Answer 45

$2,500 | 2 Years

Question 46

An individual who _________ violates the Fair Credit Reporting Act is liable in the amount equal to the loss to the consumer, as well as any reasonable attorney fees incurred in the process.

Answer 46

unknowingly

Question 47

Under the Fair Credit Reporting Act, if a policy of insurance is declined or modified because of information contained in either a consumer or investigative report, the consumer must be advised and provided with?

Answer 47

the name and address of the | reporting agency

Question 48

If a report is found to be inaccurate and is corrected, the agency must send the corrected information to all parties to which they had reported the inaccurate information within the last ________

Answer 48

2 Years

Question 49

As defined by the Act, _____ ______ includes information regarding a customer's delinquencies, late payments, insolvency or any other form of default.

Answer 49

Negative information

Question 50

Consumer reports cannot contain certain types of information if the report is requested in connection with a life insurance policy or credit transaction of less than $150,000. The prohibited information includes bankruptcies more than 10 years old, civil suits, records of arrest or convictions of crimes, or any other negative information that is more than _________

Answer 50

7 years

Question 51

a membership corporation owned by member insurance companies. It is a nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals

Answer 51

Medical Information Bureau (MIB)

Question 52

True or False? Insurers cannot refuse coverage solely on the basis of adverse information on an MIB report.

Answer 52

True

Question 53

Medical examinations, when required by the insurance company, are conducted by physicians or paramedics at whose expense?

Answer 53

The insurer's

Question 54

The insurer must disclose the use of testing to the applicant, and obtain written consent from the applicant on the approved form; The insurer must establish written policies and procedures for the internal dissemination of test results among its producers and employees to ensure confidentiality. These laws and regulation have been enacted for insurer's requiring an applicant to submit to what type of test?

Answer 54

HIV

Question 55

When must disclosure statements be given? | And what are their purpose?

Answer 55

1.no later than the time the application for insurance is signed 2.help the applicants to make more informed and educated decisions about their choice of insurance.

Question 56

When insurers plan to seek and use information from investigators, they must first provide the applicant/insured with a written _____ _______ ______

Answer 56

Disclosure Authorization Notice

Question 57

what does HIPAA stand for?

Answer 57

Health Insurance Portability and Accountability Act

Question 58

A prospective insured may be rated as one | of the three rating classifications

Answer 58

standard, substandard, or preferred

Question 59

The higher the ____, the higher the _______

Answer 59

risk, premium

Question 60

individuals who meet certain requirements and qualify for lower premiums than the standard risk. These applicants have a superior physical condition, lifestyle, and habits

Answer 60

Prefered risks

Question 61

persons who are entitled to insurance protection without extra rating or special restrictions. They are representative of the majority of people at their age and with similar lifestyles. They are the average risk

Answer 61

Standard Risks

Question 62

____________ risk applicants are not acceptable at standard rates because of physical condition, personal or family history of disease, occupation, or dangerous habits. These policies are also referred to as "_____" because they could be issued with the premium rated-up.

Answer 62

Substandard (High exposure). | rated

Question 63

Applicants who are rejected are considered ________

Answer 63

declined risk

Question 64

_________________ is a life insurance arrangement in which a person with no relationship to the insured (a "stranger") purchases a life policy on the insured's life with the intent of selling the policy to an investor and profiting financially when the insured dies

Answer 64

Stranger-originated life insurance (STOLI)

Question 65

STOLIs violate what principle?

Answer 65

the principle of insurable interest

Question 66

another name for a STOLI is?

Answer 66

Investor-owned life insurance (IOLI)

Question 67

Who will deliver the policy to the insured?

Answer 67

The Agent

Question 68

what ways are acceptable to deliver the policy?

Answer 68

personal delivery and Mailing

Question 69

when is a policy considered legally delivered?

Answer 69

When the insurer relinquishes control of the policy by mailing it to the policyowner.

Question 70

what does personal delivery allow for?

Answer 70

allows the agent an opportunity to make sure that the insured understands all aspects of the contract. Review of the contract with the insured involves pointing out provisions or riders that may be different than anticipated, and explaining what effect they have on the contract. In addition, the agent should explain the rating procedure to the client, especially if the policy is rated differently than applied for, or has been modified or amended in any other way. The agent should also explain any other choices and provisions available to the policyowner that may become active at this time.

Question 71

What does a buyer's guide provide?

Answer 71

basic, generic information about life insurance policies and explains how a buyer should go about choosing the amount and type of insurance to buy, and how a buyer can save money by comparing the costs of similar policies

Question 72

when must a buyer's guide be delivered?

Answer 72

Insurers must provide a buyer's guide to all prospective policy applicants prior to accepting their initial premium. If the policy contains an unconditional refund provision of at least 10 days (free-look period), a buyer's guide can be delivered with the policy.

Question 73

What is a policy summary?

Answer 73

a written statement describing the features and elements of the policy being issued. It must include the name and address of the agent, the full name and home office or administrative office address of the insurer, and the generic name of the basic policy and each rider. A policy summary will also include premium, cash value, dividend, surrender value and death benefit figures for specific policy years

Question 74

When must a policy summary be provided?

Answer 74

The policy summary must be provided when the policy is | delivered.

Question 75

A buyer's guide provides _____ information on various types of policies. A policy summary provides ______ information on the policy being issued.

Answer 75

generic, specific

Question 76

If the initial premium is not paid with the application when is the agent required to collect?

Answer 76

at the time of policy delivery

Question 77

If premium is paid at the time of delivery when does the policy go into effect?

Answer 77

the policy does not | go into effect until the premium has been collected

Question 78

what must the agent collect at time of policy delivered, if the premium was not submitted at application?

Answer 78

premium, and a statement of good health

Question 79

If the full premium was submitted with the application and the policy was issued as requested, the policy coverage would generally coincide with?

Answer 79

the date the application was submitted if no medical exam was required or on the date of the medical exam if required

Question 80

what is the purpose of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, also known as the USA PATRIOT Act

Answer 80

to address social, | economic, and global initiatives to fight and prevent terrorist activities