Completing The Application, Underwriting, And Delivering The Policy

Question 1

Adverse selection

Answer 1

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

Question 2

Agent/Producer

Answer 2

a legal representative of an insurance company; the classification of producer
usually includes agents and brokers; agents are the agents of the insurer

Question 3

Applicant or proposed insured

Answer 3

a person applying for insurance

Question 4

Beneficiary

Answer 4

a person who receives the benefits of an insurance policy

Question 5

Death benefit

Answer 5

the amount paid upon the death of the insured in a life insurance policy

Question 6

Fraud

Answer 6

intentional misrepresentation or deceit with the intent to induce a person to part with
something of value

Question 7

Insurance policy

Answer 7

a contract between a policyowner (and/or insured) and an insurance company
which agrees to pay the insured or the beneficiary for loss caused by specific events

Question 8

Insured

Answer 8

person covered by the insurance policy; may or may not be the policyowner

Question 9

Insurer (principal)

Answer 9

the company who issues an insurance policy

Question 10

Lapse

Answer 10

policy termination due to nonpayment of premium

Question 11

Life insurance

Answer 11

coverage on human lives

Question 12

Policyowner

Answer 12

the person entitled to exercise the rights and privileges in the policy

Question 13

Premium

Answer 13

the money paid to the insurance company for the insurance policy

Question 14

Insurance is

Answer 14

a transfer of risk of loss from an individual or a business entity to an
insurance company, which, in turn, spreads the costs of unexpected losses to
many individuals.

Question 15

The term insurance transaction

Answer 15

Solicitation;
Negotiations;
Sale (effectuation of a contract of insurance); and
Advising an individual concerning coverage or claims.

Question 16

Types of Insurers

Answer 16

Stock companies

Mutual companies

Question 17

Domicile of Insurer:

Answer 17

domestic insurer
foreign
alien insurer.

Question 18

Elements of a Legal Contract

Answer 18

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

Question 19

Offer and Acceptance

Answer 19

There must be a definite offer by one party, and the other party must accept this offer in its exact terms. In insurance, the applicant usually makes the offer when submitting the application. Acceptance takes place when an insurer’s underwriter approves the application and issues a policy.

Question 20

Consideration

Answer 20

The binding force in any contract

Question 21

Contract of Adhesion

Answer 21

is prepared by one of the parties (insurer) and accepted or rejected by the other party (insured

Question 22

Aleatory Contract

Answer 22

which means there is an exchange of unequal

amounts or values.

Question 23

Unilateral Contract

Answer 23

only one of the parties to the contract is legally bound to do anything

Question 24

Conditional Contract

Answer 24

conditional contract requires that certain conditions must be met by the policyowner and the company in order for the contract to be executed,

Question 25

A warranty

Answer 25

is an absolutely true statement upon which the validity of the insurance policy depends

Question 26

Representations

Answer 26

are statements believed to be true to the best of one’s

knowledge,

Question 27

misrepresentations

Answer 27

Untrue statements

Question 28

material misrepresentation

Answer 28

is a statement that, if

discovered, would alter the underwriting decision of the insurance company

Question 29

conditional receipt

Answer 29

which is used only when the applicant submits a prepaid application.

Question 30

Replacement

Answer 30

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

Question 31

Underwriting

Answer 31

is the risk selection and classification process

Question 32

Insurable Interest

Answer 32

To purchase insurance, the policyowner must face the possibility of losing money or something of value in the event of loss.