Completing the Application, Underwriting, and Delivery

Question 1

Adverse Selection

Answer 1

insuring of risks that are more prone to losses than the average risk

Question 2

Lapse

Answer 2

policy termination due to nonpayment of premium

Question 3

Definition of insurance

Answer 3

the transfer of risk of loss

Question 4

Types of insurers

Answer 4

1. Stock companies (nonparticipating) - owned by stockholders
2. Mutual companies (participating) - owned by policyowners

Question 5

What must insurers obtain before transacting business in a state (admitted)

Answer 5

Certificate of Authority from DoI

Question 6

Domicile of Insurer (defined)

Answer 6

location of incorporation.
Domestic (in-state)
Foreign (out-of-state)
Alien (out-of-country)

Question 7

Producer’s responsibilities

Answer 7

1. Solicitation
2. Preventing adverse selection
3. Completing the application
4. Obtaining signatures
5. Collecting initial premium
6. Delivering policy

Question 8

Conditional receipt (defined)

Answer 8

coverage will be effective either on date of application or date of medical exam (whichever is later)

Question 9

When must insurable interest exist on life policies?

Answer 9

At the time of application

Question 10

What is the key source underwriters use for obtaining information about the life insurance applicant

Answer 10

The application

Question 11

Penalty for unknowingly violating FCRA

Answer 11

amount of loss to the consumer plus reasonable attorney fees

Question 12

Penalty for knowingly violating FCRA

Answer 12

up to $2500

Question 13

Life insurance risk classifications

Answer 13

Standard
Substandard (“rated”)
Preferred

Question 14

STOLI

Answer 14

Stranger-originated Life Insurance
1) Purchased solely to sell the policy for life settlements
2) Violates insurable interest (not interested in the longevity of the insured)
3) NOT the same thing as a Life Settlement

Question 15

Life Settlement (defined)

Answer 15

selling an EXISTING life insurance policy

Question 16

Buyer’s Guide vs Policy Summary

Answer 16

Buyer’s Guide: generic information on types of policies
Policy Summary: Specific information on the policy being issued

Question 17

When might the start of coverage be delayed until the date of delivery?

Answer 17

When premium is not collected upon application. Instead, premium is collected on date of delivery (with statement of good health).

Question 18

Agent’s Report

Answer 18

Agent communication with underwriter re: applicant

Question 19

3 factors that determine permium (life)

Answer 19

mortality, interest, expense

Question 20

Gramm-Leach-Bliley Act

Answer 20

Prohibits disclosing non-public PI to nonaffiliated 3rd parties