Life insurance Underwriting and Policy Issue

Question 1

Which of these actions should a producer take when submitting an insurance application to an insurer?
<> Disclose to the applicant the amount of commissions to be earned on this transaction
<> Inform insurer of relevant information not included in the application
<> Issue a binding receipt to the applicant if no initial premium is submitted
<> Arrange for a copy of the Attending Physician Statement (APS) to be sent to the producer

Answer 1

Inform insurer of relevant information not included on the application
~ One of the actions a producer should take when submitting an application is to advise the insurer of any other relevant information not contained in the application

Question 2

Which of these terms accurately defines an underwriter's assessment of information on a life insurance application?
<> Warranty review
<> Inspection report
<> Risk classification 
<> Insurable interest

Answer 2

Risk classification
~ Underwriting, another term for risk selection, is the process of reviewing the many characteristics that make up the risk profile of an applicant to determine if the applicant is insurable and, if so, at standard or substandard rates

Question 3

Any changes made on an insurance application requires the initials of whom?
<> Applicant
<> Insured
<> Agent
<> Beneficiary

Answer 3

Applicant
~ When an applicant makes a mistake in the information given to an agent in completing the application, the applicant can have the agent correct the information, but the applicant must initial the correction

Question 4

T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?
<> Conditional receipt 
<> Warranty receipt
<> Backdated receipt
<> Binding receipt

Answer 4

conditional receipt
~ A conditional receipt binds the insurer to coverage as of the date of the application or medical exam, provided the proposed insured is determined to be an acceptable risk

Question 5

What is being delivered during a policy delivery?
<> Policy summary sheet and disclosure material to the proposed insured
<> Application and initial premium to the insurer
<> Insurance contract to the proposed insured
<> A ending receipt to the proposed insured

Answer 5

Insurance contract to the proposed insured

~ Policy deliver refers to the delivery of the insurance contract to the applicant

Question 6

From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant?
<> Life Insurance Buyer's Guide 
<> Medical Information Bureau 
<> Part III of the application
<> Fair Credit Reporting Act

Answer 6

Fair Credit Reporting Act
~ The Fair Credit Reporting Act requires that an insurance application state that an investigative consumer report may be obtained on an applicant

Question 7

Upon delivery of a rated life insurance policy, the Producer must obtain each of the following, EXCEPT: 
<> Signed HIPPA disclosure
<> Signed amendment
<> Signed statement of Good Health
<> The required premium

Answer 7

Signed HIPPA discloser
~ Upon delivery of a rated life insurance policy the Producer must obtain all of these EXCEPT a “signed HIPPA disclosure” the HIPPA disclosure should be taken at the time of sale with the application

Question 8

On delivery of a policy, a signed statement of good health is typically requested if:
<> The policy contains a guaranteed insurability rider
<> The application was submitted without the initial premium
<> The quarterly premium payment mode was selected
<> A conditional receipt was given to the applicant

Answer 8

The application was submitted without the initial premium
~ On delivery of a policy, a signed statement of good health is typically requested of the application was submitted without the initial premium

Question 9

On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?
<> Collect initial premium
<> Explain to the applicant the policy is no longer inn effect due to change in health condition
<> Collect initial premium along with a signed health statement
<> Collect initial premium and leave a binding receipt

Answer 9

Collect initial premium along with a signed health statement

Question 10

A life insurance application must be signed by all of these, EXCEPT:
<> The policy owner 
<> The agent
<> The insured (if an adult)
<> beneficiary

Answer 10

Beneficiary

~ Beneficiaries are not required to sign an insurance application

Question 11

A student pilot can pay regular premiums costs for her life insurance policy with the addition of which of the following?
<> Guaranteed Insurability rider
<> Accidental Death Benefit rider
<> Aviation exclusion 
<> Impairment rider

Answer 11

Aviation exclusion
~ A student pilot can pay standard premium costs for her life insurance policy with the addition of an aviation exclusion

Question 12

Which of these factor do NOT play a role in the underwriting of a life insurance policy?
<> Occupation
<> Avocations
<> Credit status 
<> Marital status

Answer 12

Marital status

~ Marital status does not affect the underwriting of a life insurance policy

Question 13

What is the purpose of a Policy Summary?
<> It details the commissions earned by the agent
<> It allows the consumer to compare the cost of different policies
<> It highlights the critical parts of the policy issued
<> It guarantees a policy will be issued

Answer 13

It highlights the critical parts of the policy issued
~ A policy summary highlights the critical parts of the policy issued and describes the coverages, riders, and exclusions

Question 14

Before a life insurance policy is issued, which of these components of the contract is required?
<> Beneficiary's signature
<> A conditional receipt 
<> Applicant's signature on application
<> Attending Physician Statement (APS)

Answer 14

Applicant’s signature on application

~ A signature on an application is required before a life policy will be issued

Question 15

The underling process involves all of these, EXCEPT for: 
<> Application
<> Risk classification
<> Policy loan
<> Credit report

Answer 15

Policy loan

~ A policy loan is not a factor in the underwriting process

Question 16

When a policy owner cash surrenders a Universal Life insurance policy in it's early years, this may be considered a red flag for a(AN): 
<> Unfair trade practice violation 
<> Anti-money laundering violation
<> Title 18 fraud violation
<> Federal fair credit act violation

Answer 16

Anti-money laundering violation
~ When a policy owner cash surrenders a Universal Life Insurance policy in it’s early years, this may be considered a red flag for an Anti-Money Laundering violation

Question 17

Which of the following statement is CORRECT about an agent who is taking an insurance application?
<> The agent should avoid asking the applicant questions that may cause embarrassment
<> The agent should have the applicant initial any changes made on the application
<> The application may answer routine questions for the applicant
<> The agent may allow a member of the applicant’s immediate family to sign the application if the applicant is not available

Answer 17

The agent should have the applicant initial any changes made on the application

Question 18

Agent J takes an application and initial premium from an applicant and sends the application and premium check to the insurance company. The insurance company returns the check back to J because the check is made out to J instead of the insurance company. What action should J take?
<> Cross of his name on the “pay to” portion of the check, write the name of the insurance company, and send the check back to the insurance company
<> Deposit the applicant’s check into his account and make a personal check out to the insurance company from his personal account
<> Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company
<> Deposit the check in to his personal account, use the funds to purchase a chasers check, and send the new cashiers check back to the insurance company

Answer 18

Return to the customer, collect a new check made out to the insurance company, and send the new check out to the insurance company
~ If an agent receives a check made out to them instead of the insurance company, they should return the check to the customer and collect a new check properly made out to the insurance company

Question 19

When an insurance application is taken by a producer, which of these statement is true?
<> The producer has the discretion to ask or not to ask any of the questions listed on the application
<> Any changes made on the application can later be initialed by the producer if the applicant is unavailable
<> The application should have an attorney present during the application process
<> Any changes made on the application require the applicant’s initials

Answer 19

Any changes made on the application require the applicant’s initials
~ The producer should have the applicant initial any changes made on the application.

Question 20

What action should a producer take if the initial premium is NOT submitted with the application?
<> Forward the application to the insurer after giving the applicant a conditional receipt
<> Keep he application until premium is paid
<> Forward the application to the insurer after giving the applicant a binding receipt
<> Forward the application to the insurer without the initial premium

Answer 20

Forward the application to the insurer without the initial premium
In this situation, the producer should submit the application to the insurance company without the premium.
However, if a premium is not paid with the application, the policy will not become valid until the initial premium is collected

Question 21

P is a producer who notices 5 questions on a life application were not answered. What actions should P take?
<> Call the applicant and complete application over the phone
<> Mail incomplete application to applicant to be completed and returned to the agent
<> Submit the application as-is to the insurer
<> Set up a meeting with the applicant to answer the remaining questions

Answer 21

Set up a meeting with the applicant to answer the remaining questions
~ In this situation, the producer should schedule another appointment with the applicant to complete the unanswered questions

Question 22

An insurance company may NOT reject a prospective insured's life application on the basis of which of the following factors?
<> Weight 
<> Medical history
<> Gender
<> Hobbies

Answer 22

Gender

~ An insurance company may NOT reject a prospective insured’s life application on the basis of gender

Question 23

K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. if the application is approved, when will coverage be effective?
<> The date the sales appointment was made
<> The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured
<> The date the application was submitted to the insurance company
<> The date of application

Answer 23

The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured
~ In this situation, coverage will go into effect the date the agent delivers the policy, collects the initial premium, and obtains a good health statement from the insured.

Question 24

Which of the following correctly explains the actions an agent should take if a customer wants to apply for an insurance policy?
<> Complete the application over the phone with the customer, sign the application for the customer, then send the application to the insurance company
<> Have the customer sign a blank application back to his office to complete prior to sending it off to the insurance company
<> Have the customer fill out the application and send it to his office for him to sign, then send it off to the insurance company
<> Complete the application and review the information with the customer prior to obtaining the customer’s signature, then send the application off to the insurance company

Answer 24

Complete the application and review the information with the customer prior to obtaining the customer’s signature, then send the application off to the insurance company

Question 25

Which federal law allows an insurer to obtain an inspection report on a potential insured?
<> Medical Information Bureau Act
<> Fair Credit Reporting Act
<> Freedom of Information Act 
<> Medical Information Act

Answer 25

Fair Credit Reporting Act
~ The FCRA of 1970, established procedures for collection and disclosure of information obtained on consumers through investigation and credit reports

Question 25

Which federal law allows an insurer to obtain an inspection report on a potential insured?
<> Medical Information Bureau Act
<> Fair Credit Reporting Act
<> Freedom of Information Act 
<> Medical Information Act

Answer 25

Fair Credit Reporting Act
~ The FCRA of 1970, established procedures for collection and disclosure of information obtained on consumers through investigation and credit reports

Question 26

Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine:
<> If applicant is a tobacco user
<> overall health of the applicant
<> probability of making timely premium payments
<> driving history

Answer 26

probability of making timely premium payments
~ The purpose of these reports is to provide a picture of an applicant’s general character and reputation, mode of living, finances, and any exposure to abnormal hazards,

Question 27

Information obtained from a phone conversation to the proposed insured can be found in which of these reports?
<> Attending physician's report 
<> Agent's report 
<> Inspection report 
<> MIB report

Answer 27

Agent’s report

~ An inspection report may include information obtained by a telephone call to proposed insured

Question 28

An incomplete life insurance application submitted to an insurer will result in which of these actions?
<> Application will be approved with restrictions
<> Application will be returned to the writing agent
<> Application will be automatically declined
<> Application will be pending until MIB report is sent to the insurer

Answer 28

Application will be returned to the writing agent

~ If the company discovers a mistake or incompletion, it usually returns the application to the producer

Question 29

Which parts of a life insurance policy are guaranteed to be true?
<> Representation
<> Statement 
<> Warranty 
<> Rating

Answer 29

Warranty
~ Warranties are statements that are considered literally true. A warranty that is not literally true in every detail, even if made in error, is sufficient to render a policy void

Question 30

M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect, EXCEPT:
<> Insurance company issues policy
<> Initial premium is collected
<> Policy is delivered
<> Free-look period

Answer 30

Free-look period has expired
~ In this situation, the policy will go into effect after all these actions occur EXCEPT the expiration of the free-look period

Question 31

Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy February 13. How will the insurer handle this situation?
<> Premium will be fully refunded minus a prorated amount for the period of Feb. 7 - Feb. 13
<> Policy was returned within the free-look period, premium will bee fully refunded
<> Premium will be fully refunded minus a surrender charge
<> Policy was not returned within the free-look period, premium will not be refunded

Answer 31

Policy was returned within the free-look period, premium will bee fully refunded
~ The free-look period begins when the policy is delivered to policy owner

Question 32

Which factors are taken into consideration when an insurance company determines the premium rate fro a Whole Life policy on an applicant?
<> Risk classification
<> Source of income
<> Geographical location
<> Marital status

Answer 32

Risk classification
~ To determine premium rate on a Whole Life policy, an insurance company will consider the risk classification of the applicant

Question 33

At what time must a policy owner have insurable interest on the insured in order for the life policy to be valid?
<> When the insured dies
<> At the time of application
<> After the Contestable period
<> When the policy proceeds are paid

Answer 33

At the time of application

~ With life insurance, insurable interest must exist only at the policy inception