Chapter 3

Question 1

An MIB contains information about

Answer 1

An applicants previous health history

Question 2

All of the following are factors which affect a life insurance risk EXCEPT;

Answer 2

Unearned Income

Question 3

Which of the following is true regarding the doctrine off insurable interest?

Answer 3

Insurable interest must exist at the time of the application.

Question 4

All of the following are types of premium receipts EXCEPT

Answer 4

countersignature receipt

Question 5

An applicant who conceals material information may be subject to which of the following?

Answer 5

Policy cancelation with returned premium

Question 6

A life insurance underwriter receives the greatest amount of insurability information from which of the following sources?

Answer 6

The insurance application

Question 7

Each of the following methods may be used to rate up insurance policy EXCEPT

Answer 7

Preferred Risk method

Question 8

Which of the following receipts provides coverage immediately upon the payment of the premium?

Answer 8

Binding Receipt

Question 9

Which of the following risk classifications is characterized by a lower annual premium?

Answer 9

Preferred Risk

Question 10

John applies for life insurance and pays an initial premium. He is provided with insurability type of conditional receipt. The next day Johns dies in an auto accident. The insurer is notified by Johns wife the following day. What action will the insure take?

Answer 10

Underwrite the policy and if John is found insurable, the insure will pay the claim.

Question 11

Which of the following is the primary purpose of the Medical Information Bureau?

Answer 11

Allows the insurer to avoid high risk applicants.

Question 12

If an applicant for life insurance is considered substandard risk but still insurable, it will probably take which of the following actions?

Answer 12

Accept the risk and rate up the premium

Question 13

An application completed were the applicant and the proposed are insured are different persons would have to be signed by which of the following?

Answer 13

The agent, applicant, and the proposed insured.

Question 14

If a premium is not paid at the time an application for life insurance is completed, when will coverage go into effect?

Answer 14

When the producer delivers the policy and collects the premium.

Question 15

If no premium is paid with an application for life insurance, what responsibilities does an agent possess when the policy is delivered?

Answer 15

Collect the premium and a statement of continued good health and issue a premium receipt.

Question 16

Tom Baney applies for life insurance but pays no initial premium. The application is submitted to underwriting , is approved and a policy is issued. When the agent attempts to delivery the policy she learns that Tom is in the hospital. What should she do?

Answer 16

Do not delivery the policy nor collect the premium.

Question 17

What are increased rating methods?

Answer 17

Step up in age or rate up in age.( 45 year old rated as 50 year old due to substandard risk.)
Flat extra rate
Percentage of the normal rate.( stunt Pilot substandard or high risk)

Question 18

What are some producer responsibilities at delivery?

Answer 18

Review some of the befits of the insurance contract.

Person insured, coverage amount, effective date of coverage, policy provisions, beneficiaries and annual premiums

Question 19

What are some premium factors/

Answer 19

Age of proposed insured, sex females pay lower premiums, health history, family health history, personal activities or hobbies, personal habits, occupation, salary earnings, traveling out the country.

Question 20

What are the three different selection criteria for proposed life insurance?

Answer 20

Standard risk (normal premium) Substandard risk (high risk) and Preferred risk (excellent health low premiums)

Question 21

Three Primary duties of an Underwriter

Answer 21

assess the risk, determining premiums and protecting the insurer against adverse selection.

Question 22

Section II of the application contains

Answer 22

proposed inured health history

Question 23

When producers complete an application he or she must include at least two required signatures.

Answer 23

Applicant and the Producer

Question 24

If the producer alters or changes the application in any way without informing the applicant or insurer he or she may have committed what ?

Answer 24

Fraud

Question 25

Is a true statement made by the applicant in response to section I & II of the application?

Answer 25

Representation

Question 26

If a applicant makes any statement that are “guaranteed” to be true he or she has made a

Answer 26

Warranty

Question 27

Generally provide coverage as the date of the receipt as long as specific condition is satisfied

Answer 27

Conditional Coverage

Question 28

An application submitted with out a premium

Answer 28

Trial application ( Statement of good health must be submitted as well)

Question 29

The producer should collect the premium from the applicant

Answer 29

at the time of the application