Completing the application, Underwriting, and Delivering the policy Flashcards
What is insurance?
Insurance transfers the risk of loss from an individual or business entity to an insurance company, which in turn spreads the costs of unexpected losses to many individuals.
WHAT IS INCLUDED UNDER THE TERM INSURANCE TRANSACTION?
Solicitation, negotiating prior to execution of a contract, execution of a contract, and the transaction of any matters that arise as a result of the contract, as well as the actual process of insuring.
WHAT IS THE DIFFERENCE BETWEEN AN AUTHORIZED/ADMITTED AND UNAUTHORIZED/NONADMITTED INSURER?
An admitted or authorized insurer is qualified and received a Certificate of Authority from the Department of Insurance to transact Insurance in the state. A nonadmitted/unauthorized insurer is an insurance company that has not applied for, or has been denied a Certificate of Authority and may not transact Insurance.
WHAT ARE THE FOUR ELEMENTS OF AN INSURANCE CONTRACT?
Agreement-offer and acceptance, consideration, competent parties, and legal purpose.
WHAT DOES REPRESENTATION MEAN AND HOW DOES IT DIFFER FROM A WARRANTY?
Representations are statements believed to be true to the best of one’s knowledge. A warranty is an absolutely true statement upon which the validity of the insurance policy depends.
WHAT INFORMATION IS GATHERED IN PARTS 1&2 OF THE APPLICATION?
Part 1 of the application includes the general questions about the applicant, including name, age, address, birth date, gender, income, marital status, and occupation. Part 2 includes medical information about prospective insured.
WHAT IS THE PURPOSE OF THE AGENT’S REPORT?
The agent’s (producer’s) report is used by the agent to discuss his or her personal observations concerning the proposed insured.
WHO IS REQUIRED TO SIGN AN APPLICATION FOR LIFE INSURANCE?
Both the agent and the proposed insured (usually the application) must sign the application.
WHEN DOES AN INSURANCE POLICY GO IN EFFECT?
The policy will go into effect when the first premium is paid and the policy has been delivered.
WHAT IS UNDERWRITING?
Underwriting is the risk selection and classification process.
IN A LIFE INSURANCE POLICY, WHEN MUST INSURABLE INTEREST EXIST?
Insurable interest must exist between the policyowner and the insured at the time of application (or the time of policy issue), but not at the time of loss.
WHAT IS THE PURPOSE OF THE FAIR CREDIT REPORTING ACT?
The act established procedures that consumer reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used. It also protects consumers against the circulation of inaccurate or obsolete information.
WHAT IS THE DIFFERENCE BETWEEN A CONSUMER REPORT AND AN INVESTIGATIVE CONSUMER REPORT?
Investigative Consumer Reports are similar to consumer reports in that they also provide information on the consumer’s character, reputation, and habits. The primary difference is that the information is obtained through an investigation and interviews with associates, friends and neighbors of the consumer.
HOW CAN AN INSURANCE COMPANY USE THE INFORMATION IT OBTAINS FROM THE MIB?
It can use MIB information to conduct further investigation into an applicant’s current insurability.
HOW DOES A SUBSTANDARD RISK POLICY DIFFER FROM A STANDARD RISK?
Substandard risk applicants are not acceptable at standard rates because of physical condition, personal or family history of disease, occupation, or dangerous habits. These policies could be issued with the premium rated up (higher than the standard risk)
