ch 1 flashcards
(24 cards)
Who must have insurable interest to be insured?
The policy owner
What is insurable interest?
Insurable interest means the potential policyholder (the policy owner) would experience a financial loss or hardship if the insured person were to die. It’s a legal requirement that ensures a valid reason for taking out a life insurance policy on someone other than oneself. This prevents insurance fraud and ensures the policy serves its intended purpose of providing financial protection.
What is adverse selection?
People who are more likely to submit insurance claims are seeking insurance more often then preferred risk
What is a preferred risk
A preferred risk in life insurance refers to indivuals deemed to ahve lower than average risk of life or death, typically due to excellent health and lifestyle
What two elements are neccesaary for a life insurance contract to have legal purpose?
Insurable interest and Consent
If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriters main concern?
The existence of insurable interest between the applicant the insured
What is a surrender value?
the amount of money you would receive if you choose to cancel or surrender your life insurance policy before it matures. It’s essentially the cash value of your policy, but after any surrender charges or other fees are deducted.
When does the policy coverage become effective?
As of the application date
Who established the Do-Not-Call registry?
The Federal Trade Commission
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report must:
Be informed of the source of the report
What is the earliest hour that a telemarketer can make a call?
8 a.m.
What is another word for a Substandard risk classification?
Rated because the premium can be issued rated up
What is the point of a conditional receipt?
Coverage begins on the date of the appliocation or medical examination (Whichever is later), on CONDITION that that the applicant is determined to be insurable at the rate appled for.
It is intended to provide coverage on a date prior to the policy issue
All of the following are duties and responsibilities of producers at the time of application except:
Check to make sure that there are no unanswered questions on the application
Explain the nature and type of any receipt the producer is giving to the applicant
Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information
Change any incorrect statement on the application by personally initialing next to the correct statement
Changing any incorrect statement on the application by personally initialing next to the corrected statement
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to compy?
They have five days to comply
The agent is known as the “field underwriter” because of the information the agent gathers for the insurer. How does this help the insurer?
By pre-selecting applicatants the would present the lowest risk of loss for the insurer.
Reducing the number of staff underwriter
Complying with state law
Keeping expenses down by not hiring seperate agents and field underwriters
What does the term “illustration mean”?
The term “illustration” means a presentation or depiction that includes NONGUARENTEED elements of a policy of individual or group life insurance over a period of years
If an insurer requires a medical examination of an applicant in connnection with the application for life insurance, who is respsonsible for paying for the examination?
The insurer
Does a debtor have insurable interest in the life of a lender?
A lender has an insurable interest in the life of a debtor, but only to the extent of the debt. The debtor does not have an insurable interest in the life of the lender.
If an insurer issued a policy based on the application that had unanswered questions, what would they do?
The contract will be interpreted as if the insurer waived it’s right to have an answer but will not be able to deny coverage later because of questions
When does a policy go into effect?
As early as the date of the application if the premium is submitted with the application and the policy is issued as applied for
