Life/Health Insurance Underwriting Chapter 2

Question 1

Which of the following statements regarding a conditional receipt is correct?

A. it is given only if the initial premium has been submitted with the signed application

B. it is given pending acceptance by the applicant of additional riders

C. it is given at the time of policy delivery

D. it is given when the application is completed

Answer 1

A

Question 2

All of the following are sources of insurability information about life insurance applicants except

A. the application

B. inspection reports

C. medical information bureau reports

D. social security reports

Answer 2

D

Question 3

Why do most states ban STOLI transactions?

A. because the premiums on the policies are too high

B. because the investor is not a domestic insurer

C. because the investor, who is named as the beneficiary, does not have an insurable interest in the insured

D. because they are not a profitable line of business for insurance companies

Answer 3

C

Question 4

Sam applied for a term life insurance policy, paid the initial premium, and received a conditional receipt on December 1. If the insurer issued the policy on January 1 and the agent delivered the policy on January 3, the policy effective date is

A. January 1

B. January 3

C. when the policy is delivered and a statement of continued good health is obtained

D. December 1

Answer 4

D

Question 5

ERISA requires that certain benefit and insurance plan information be made available to all of the following except

A. the state legislature

B. participants

C. the internal revenue service

D. the department of labor

Answer 5

A

Question 6

Which of the following statements pertaining to the fair credit reporting act is not correct?

A. Peg’s application for life insurance is rejected because of an unfavorable consumer report. She has a right to know what information the reporting agency has and can insist that any errors in the data be corrected

B. the fair credit reporting act does not apply to insurance companies who use their own staffs to investigate an applicant for insurance

C. a life insurance company obtains a consumer report on Burl, and applicant, without advising him of its intended action. The company has violated the fair credit reporting act

D. the fair credit reporting act is a state law that helps to ensure accurate reporting of information about consumers

Answer 6

D

Question 7

Which of the following acts helps ensure confidential, fair and accurate reporting of consumer information?

A. unfair trade practices act

B. disclosure act

C. mccarran ferguson act

D. fair credit reporting act

Answer 7

D

Question 8

Louise applied for a $40,000 life insurance policy, paid the initial premium, and received a conditional receipt. Which of the following statements is not correct?

A. If Louise died from an accidental fall a few days before her required medical exam, the insurer would return the full premium that was paid with the application with no coverage ever having gone into effect

B. If Louise died of a heart attack 1 day after completing the medical exam, which fulfilled her requirements, the insurer would continue to underwrite the policy as if she were still alive

C. If Louise completed her requirements by taking the required medical exam, but died 4 days later from an accidental fall, the insurer would still pay the beneficiary the coverage amount as long as the policy was issued as originally applied for

D. If Louise died of a heart attack 1 day before taking the required medical exam, the insurer would still pay the beneficiary the coverage amount stated in the application

Answer 8

D

Question 9

Which of the following statements regarding the delivery of a life insurance policy is not correct?

A. during the delivery appointment, the agent must have the application signed by the policyowner

B. an agent has an ethical responsibility to explain the policy, including any riders, exclusions, or other details of the policy, to the policyholder

C. during the delivery appointment, the agent should review the policy with the policyholder

D. agents will usually get a signed receipt from the policyowner

Answer 9

A

Question 10

For situations where no initial premium was paid when the application was taken, when delivering that policy the agent is generally required to do all of the following except

A. explain the policy, its provisions, and any riders, exclusions, or ratings involved

B. collect any premium due

C. obtain a statement of good health from the insured

D. present the insured with a conditional receipt

Answer 10

D

Question 11

Choua applied for a $100,000 whole life policy but did not pay the initial premium at the time of application. When the agent later delivers the policy, the agent must collect the premium and obtain which of the following statements from Choua?

A. a statement of no material change in risks

B. a statement of insurability

C. a statement of good health

D. a statement of continued representations and warranties

Answer 11

C

Question 12

Which of the following statements regarding life insurance applications is not correct?

A. statements made by the applicant on the application are considered to be warranties

B. the application must be carefully reviewed by the agent for completeness

C. completed applications contain personal information, which must be protected

D. the application may not be altered without the change being initialed by the applicant

Answer 12

A

Question 13

Which of the following statements about policy delivery is correct?

A. the insurer typically sends the policy directly to the policyowner

B. policies cannot be mailed to agents for delivery to policyowners

C. constructive delivery is not considered a legal means of delivering an insurance policy

D. most insurers require agents to personally deliver the policy so that they can explain the policys terms, exclusions, and riders

Answer 13

D

Question 14

When Lisa applied for a life insurance policy, the agent issued a receipt stating that the coverage is effective as of the date of application, if the applicant is found to be insurable under the companys general underwriting rules. This type of receipt is known as

A. an inspection receipt

B. an acceptance receipt

C. a binding receipt

D. a conditional receipt

Answer 14

D

Question 15

Lawrence signed an application for a life insurance policy on September 2 and took a required medical exam on September 4. He gave the agent a check for the initial premium and received a conditional receipt at the time of application. The policy was issued as originally applied for and the agent delivered the policy to him on October 15. The earliest effective date for Lawrences insurance policy would be

A. september 4

B. december 31

C. october 15

D. september 2

Answer 15

A

Question 16

Which of the following statements pertaining to the Medical information bureau is correct?

A. information maintained by the mib includes socio-economic data such as income, level of education, and zip code

B. information obtained from the mib by insurers may not be used as the sole reason to decline an applicants request for insurance

C. insurers must report all underwriting decisions to the mib

D. insurers do not need to get release of information forms from applicants

Answer 16

B

Question 17

All of the following factors influence an applicants mortality except

A. dangerous hobby

B. credit report

C. hazardous occupation

D. personal habits

Answer 17

B

Question 18

Which of the following situations would create a possible errors and omissions liability to the producer?

A. during the sale of a replacement health policy, the producer tells an applicant that the new policy will cover expenses ordinarily paid by Medicare.

B. the producer fails to inform the client that her policy is being canceled at the end of the year

C. the producer informs the insurer that he has serious doubts about the applicants insurability

D. the producer fails to return phone calls from the client

Answer 18

A

Question 19

Delivering policies in person gives the agent an opportunity to do all of the following except

A. confirm riders and explain policy exclusions

B. review the policy with the policyowner

C. make last minute changes to the policy

D. answer any questions the policyowner has regarding the contract

Answer 19

C

Question 20

Which of the following statements pertaining to a life insurance policy application is correct?

A. a submitted application is considered a valid offer even if the premium is not collected

B. An agent must be very specific when listing an applicants occupation on an application

C. the applicants signature is required on an application, but the agents signature is not

D. if an applicants age is shown erroneously on a life insurance application as a 28 instead of 29, this could result in a premium quote that is higher than it should be

Answer 20

B

Question 21

Which of the following statements pertaining to inspection reports and credit reports on life insurance applicants is not correct?

A. consumers must be notified and give their consent to an inspection report

B. inspection reports only require consumer notification when they are conducted

C. applicants with unfavorable credit ratings a history of moral hazard, or both are poor prospects for life insurance

D. information contained in inspection reports is usually obtained through interviews with employers, neighbors and associates of the proposed insured

Answer 21

B

Question 22

All of the following are found in the first part of the application except

A. name

B. social security number

C. hobbies

D. date of birth

Answer 22

C

Question 23

James signed an application for a $50,000 life insurance policy and paid the first premium on October 1. The agent issued a conditional receipt. A week later, James took the required medical exam and was found to be insurable. If he dies before the insurer approves the app

A. the coverage will be retroactively effective, but the policy will only pay $25,000

B. no coverage will be provided

C. no coverage will be provided, but James premium will be refunded

D. the coverage will be retroactively effective

Answer 23

D

Question 24

With regard to substandard life insurance risks, which of the following statements is correct?

A. an applicant can be deemed a substandard risk based on physical condition only, no other criteria may be considered

B. when the applicant represents a substandard risk, the policy may be modified to reduce the benefits provided

C. because of stringent underwriting requirements most life insurance applicants are classified as substandard risks

D. to provide coverage to substandard risks, insurers are allowed to charge an extra premium, however they cannot alter benefit periods or waiting periods

Answer 24

B

Question 25

Which of the following statements is correct?

A. Both Trisha and her partner Joan are licensed general (noncommercial) aviation airplane pilots. They do not have to identify their hobby when they apply for insurance.

B. George’s brother, father and grandfather had diabetes during their lifetimes. Family history will be considered a risk factor when George applies for insurance

C. Joyce’s mother died 10 lyears ago, when she was 58, of cirrhosis of the liver. Family history is a risk factor in insuring Joyce

D. Stan is applying for insurance. His younger sister, Kathryn, is committed to hang gliding. Family history is considered a risk factor in insuring Stan

Answer 25

B

Question 26

The concept of agent confidentiality requires all of the following practices except

A. notifying the applicant of insurer privacy practices

B. keeping completed applications from being seen by anyone except the applicant and authorized insurer personnel

C. notifying the applicant of a substandard rating decision by the insurer

D. avoiding gossiping about an applicants personal information with other

Answer 26

C

Question 27

All of the following are forms of unfair discrimination except

A. refusing to service the policy needs of a person because of where he lives

B. charging one person a higher premium than someone else of the same age and sex because of a higher risk represented by that person

C. refusing to sell a policy to someone because of his race or religion

D. charging one person a higher premium than another person of equal risk to the company

Answer 27

B