Unit 4 and 5: Underwriting Basics and Group Insurance

Question 1

A ____ risk is one that the insurer decides not to insure.

Answer 1

Declined

Question 2

A below average risk of loss is considered a ____ risk.

Answer 2

Preferred risk

Question 3

A ____ risk bears the same health, habits, and occupational characteristics as the person on whose lives the mortality table was based upon.

Answer 3

Standard

Question 4

A risk that does not measure up to underwriting standards is a ____ risk.

Answer 4

Substandard risk

Question 5

The tendency for poor risks to seek and be covered by insurance more often than average risks is
A. Inappropriate selection
B. Adverse selection
C. Inappropriate risk
D. Adverse risk

Answer 5

B

Question 6

John fills out an application for a life insurance policy to insure his own life, for which he plans to pay the premiums. John is playing all of the following roles except
A. Applicant
B. Policyholder
C. Insured
D. Beneficiary

Answer 6

D

Question 7

Life insurance that requires no medical exam and asks only basic medical questions is known as
A. Simplified policy
B. Simplified issue
C. Simplified risk
D. Preferred risk

Answer 7

B

Question 8

If an applicant is rated or declined an insurance policy, the reasons for this decision will be explained to the applicant by
A. The producer
B. The underwriter
C. The insurer
D. The insurance commissioner

Answer 8

A

Question 9

Robin is a 25 year old man who drinks occasionally, does not smoke, and has no known health problems. He would probably be classified by an insurer as
A. A standard risk
B. A substandard risk
C. A superstandard risk
D. A preferred risk

Answer 9

A

Question 10

Which of the following factors does NOT have an effect on insurance premium rates
A. Mortality or morbidity
B. Interest rates
C. Producer certification
D. Expenses

Answer 10

C

Question 11

To be certain that insurers have the money available to pay claims as they arise, they are required to maintain
A. A risk-based capital ratio
B. Reserves
C. Expense ratios
D. Reinsurance

Answer 11

B

Question 12

To protect against adverse selection, minimum mandatory participation requirements are established in group insurance. A plan in which the employer pays the entire premium and requires 100% participation is referred to as a(n) ____.

Answer 12

Noncontributory

Question 13

A group plan in which the employer and employee both contribute to the premium and requires a minimum of 75% participation is referred to as ____ group.

Answer 13

Contributory

Question 14

All of the following are correct regarding the underwriting procedures of group insurance EXCEPT
A. Individual members cannot select the level of benefits for their own coverage
B. A group cannot be formed only for the purposes of purchasing insurance
C. An individual policy will be provided to all members of the group
D. The employer cannot discriminate when determining eligibility of its members

Answer 14

C

Question 15

To be eligible to purchase insurance, an association group must
A. Have a constitution and bylaws
B. Be organized and maintained strictly for the purpose of obtaining insurance
C. Have insurance for the purpose of covering the association or its offers or trustees only
D. Have at least 200 members

Answer 15

A

Question 16

For group insurance policies, the covered individual receives proof of coverage in the form of
A. An insurance policy
B. An insurance contract
C. A certificate of insurance
D. A certificate of policy

Answer 16

C

Question 17

If a group insurance policy is contributory, what percentage of employees must participate?
A. No set percentage
B. 50%
C. 75%
D. 100%

Answer 17

C

Question 18

Albert works as a window washer at the top of skyscrapers. Bernie works as a window washer on the ground floor. The fact that Albert is more likely to seek insurance coverage than Bernie is an example of
A. Risk selection
B. Adverse underwriting
C. Adverse selection
D. Risk underwriting

Answer 18

C

Question 19

Gianna starts work at a new job on March 1st. She is not eligible for insurance coverage until July 1st. The period between the start date and her eligibility date is
A. The probationary period
B. The eligibility period
C. The selection period
D. The waiting period

Answer 19

A

Question 20

Gianna is eligible for coverage on July 1st. She enrolls on July 18th. She does not need to take a medical exam because she enrolled within
A. The probationary period
B. The eligibility period
C. The selection period
D. The waiting period

Answer 20

B

Question 21

Tom started work the same day Gianna did, at the same company. Tom does not try to enroll in the company insurance plan until August 15. What will Tom probably need to do?
A. Pay an extra premium
B. Fulfill the probationary period again before coverage is available
C. Look for insurance somewhere else
D. Submit to a medical exam and full individual underwriting

Answer 21

D

Question 22

The bakers Union and the butchers Union worked together to form a trust to provide insurance to their employees. This type of group is called
A. An employee group
B. A multiple employer trust
C. A Taft-Hartley trust
D. A labor group

Answer 22

C

The Taft-Hartley trust is a group that is made up of one or more unions to form a group

Question 23

Jimmy's Print Shop and Bryan's Boutique join together to form a trust to provide insurance to their employees. This type of group is called
A. An employee group
B. A multiple employer trust
C. A Taft-Hartley trust
D. A labor group

Answer 23

B

Question 24

A candlestick maker offers insurance to its employees. This type of group is called
A. An employee group
B. A multiple employer trust
C. A Taft-Hartley trust
D. A labor group

Answer 24

A

Question 25

The United Auto Workers union provides insurance to its employees. This type of group is called
A. An employee group
B. A multiple employer trust
C. A Taft-Hartley group
D. A labor group

Answer 25

D

Question 26

General Electricians offers insurance to its employees. About 80% of its eligible employees are currently covered under the plan. This plan is 
A. Contributory
B. Noncontributory
C. Inclusive
D. Noninclusive

Answer 26

A

Question 27

Group insurance generally does NOT require
A. Stringent medical underwriting
B. A short application form
C. A minimum level of participation among eligible insureds
D. A master policy owner to hold the policy

Answer 27

A

Question 28

Sara is hired to work at a restaurant. She is not eligible for insurance coverage until July 1st. The period between start date and her eligibility date is
A. An introductory period
B. A weeding out period
C. A probationary period
D. An eligibility period

Answer 28

C

Question 29

Which of the following group underwriting characteristics generally is required by law
A. Employer control
B. Predetermined coverage amount
C. Nondiscriminatory classifications
D. Insurance incidental to group

Answer 29

C