Life/Health Insurance Underwriting

Question 1

Underwriting

Answer 1

The process of evaluating a risk to determine if it is acceptable based on established insurance company guidelines

Question 2

Changes in the application must be

Answer 2

Certified and initialed by the applicant next to the correction

Question 3

Backdating

Answer 3

Some insurers allow an application to be backdated so the premium can be based on an applicant’s earlier age and lower the cost of the premium

Question 4

Most state laws allow life insurance applications to be backdated up to

Answer 4

Six months

Question 5

Record of information that pertains to the proposed insured including the producer’s relationship to the proposed insured, and anything the producer knows about the proposed insured’s financial status, habits and character

Answer 5

Producer/Agents Report (Producer’s statement)

Question 6

Does the proposed insured see the Producer’s report?

Answer 6

No, it is not attached to the policy and the application when it’s issued. Signed only by the producer.

Question 7

An “offer to buy” insurance exists when

Answer 7

The first premium is submitted with the life insurance application

Question 8

The date of the application is the effective date of a ____________ receipt, as long as the applicant is found to be insurable under the company’ standard underwriting rules

Answer 8

Conditional

Question 9

Binding receipts are effective for

Answer 9

30-60 days from the date of application even if the applicant is found to be uninsurable (mostly home and auto)

Question 10

Life insurance binders are called:

Answer 10

Temporary insurance agreements
-the insurer can either issue a policy or cancel the binder before the end of the stated period

Question 11

There are 3 parts to a life insurance application:

Answer 11

1. General information
2. Health information
3. Producer’s report

Question 12

What information is found in the first part of a life insurance application?

Answer 12

General information like name, address, DOB, SSN, DL number, marital status, income, occupation, type of policy and face amount, beneficiary, other insurance owned

Question 13

The second part of a life insurance application contains

Answer 13

Information about the insured’s physical condition and habits

Question 14

An underwriter may ask the proposed insured’s regular doctor for an _______ ________ ________ to find out about the applicant’s current condition and medical history

Answer 14

Attending Physician’s Statement (APS)

Question 15

A non-profit insurance trade association that maintains underwriting information on applicants `

Answer 15

Medical Information Bureau (MIB)

Question 16

Used to determine a consumer’s eligibility for personal credit (credit report) or insurance or for employment and may only be issued to persons who have a legitimate business need for the information

Answer 16

Consumer report

Question 17

Reports containing information obtained by interviewing individuals who know something about the consumer

Answer 17

Investigative consumer reports

Question 18

Standard risk

Answer 18

Average health and normal life expectancy and fall into the normal range anticipated by the company when it establishes its premiums. Insurable for standard rates.

Question 19

Preferred risks

Answer 19

Represent excellently health and a risk of loss that is below average and therefore favorable to the company. May be insurable at preferred or discounted rates

Question 20

Substandard risks

Answer 20

Represent below average life expectancy and a risk of loss that is above average and therefore unfavorable to the company. Can only be accepted by charging higher rates

Question 22

Insurers must not unfairly discriminate between individuals who are in the same risk class. Use of any of these are considered unfair consideration:

Answer 22

-race
-religion
-national origin
-place of residence

Question 23

The maximum penalty for obtaining consumer information reports under false pretenses is:

Answer 23

$5,ooo, imprisonment for 1 year, or both

Question 24

Enacted to protect the interests of participants in employee benefit plans as well as the interest of the participants’ beneficiaries

Answer 24

Employee Retirement Income Security Act (ERISA)