L&H 1 Flashcards
What is the purpose of the agent’s report during the application process?
The agent’s report provides the agent’s observations about the proposed insured that may help in the underwriting process
Why: The agent’s report discloses what the agent knows, observed, or learned about the proposed Insured’s risk and must be submitted in writing to the insurer. It does not become a part of the entire contract.
What is the main responsibility of a company’s underwriting unit?
Risk selection
Why: Underwriting is the process in which an insurance company determines whether a particular applicant is insurable and, if so, what premium to charge.
Who is responsible for paying the cost of a medical examination required in the process of underwriting?
Insurer
Why: If an insurer requests a medical examination, the insurer is responsible for the costs of the exam.
What is the term for the causes of loss insured against in an insurance policy?
Peril
Why: Perils are the causes of loss insured against in an insurance policy
What are the five characteristics of an ideally insurable risk?
Loss must be 1) due to chance, 2) definite and measurable, 3) statistically predictable, 4) not catastrophic, and coverage cannot be mandatory, 5)
Why: To be insurable, the Loss must be due to chance, definite, measurable and predictable, but not catastrophic.
What is consideration on the part of the insurer?
A promise to pay policy benefits
Why: Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application. The consideration on the part of the insurer is the promise to pay in the event of loss.
What is the purpose of a free-look period?
To allow the insured to return the policy with a full refund
Why: The free-look period allows the policyowner a specified number of days from receipt to look over the policy and, if dissatisfied for any reason, return it for a full refund of Premium. It starts when the policy is delivered.
Statements on the application made by an applicant for a life insurance policy are known as what?
Representations
Why: Representations are statements made by an applicant that are true to the best of the applicant’s knowledge.
Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third-party?
Absolute assignment
Why: Absolute assignment involves transferring All rights of ownership to another person. This is a permanent and total transfer of all policy rights. The new policy owner does not need to have an insurable interest in the insured.
If an underwriter requires extensive information about the applicant’s medical history, what report will best serve this purpose?
Attending Physician’s statement
Why: If the underwriters have additional questions regarding medical information provided on the application, they may request the Attending Physician’s statement (APS). The APS includes past diagnoses, treatments, length of recovery time and prognoses.
