Chapter 1 Flashcards by Rhonda Sky

Insurance is the transfer of

Risk
Loss
hazard
Peril

Risk

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Which is not an essential element of ins contract

Agreement
Legal purpose
Counteroffer
Consideration

Counteroffer

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Ins contract must contain all except

Beneficiary’s consent
Offer and acceptance
Consideration
Competent parties

Beneficiary’s consent

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What do indi9viduals use to transfer risk of loss to larger group

Exposure
Indemnity
Ins
Ins interest

Insurance

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Which is not the consideration in a policy

Something of value exchanged
Premium amount paid at time of app
Promise to pay covered losses
App given to prospective insured

App given to prospective insured

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In forming ins contract when does acceptance usually occur

When insurer recs app
When insured submits app
When insurer’s underwriter approves coverage
When an insurer delivers policy

When insurer’s underwriter approves coverage

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Which best describes aleatory nature of insurance contract

Exchange of unequal values
Only one of the parties being legally bound by contract
Ambiguities are interpreted in favor of insured
Polices are submitted to insurer on take it or leave it basis

Exchange of unequal values

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Insurer neglects to pay legit claim that’s covered under terms of policy. Which insurance principle has insurer violated

Good faith
Representation
Adhesion
Consideration

Consideration

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Ins policies are not drawn up through negotiations and an insured has little to say about its provisions. What contract characteristic does this describe

Adhesion
Unilateral
Conditional
Personal

Adhesion

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Pays 100 premium every month for his ins coverage, yet the insurer promises to pay 10000 for a covered loss. What characteristic of ins contract does this describe

Conditional
aleatory
Good health

Aleatory

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Life ins policy has a legal purpose if both of which of following elements exist

Insurable interest and consent
Underwriting and reciprocity
Offer and counteroffer

Insurable interest and consent

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Which best describes concept of paying large amount of risk on part of ins company insured pay small amount of premium

Aleatory
Adhesion
Subrogation

Aleatory

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Which of the following would qualify as competent party in ins contract

Applicant has prior felony conviction
Applicant is intoxicated at time of app
Applicant is 12
Applicant is under influence of mind impairing meds

Felony conviction

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Def of unilateral contract

One sided only one party makes an enforceable promise
Two or more go into contract knowing may be unequal exchange of value
One author: company wrote contract insured must accept as written
If one party makes condition other party can counteroffer

One sided only one party makes enforceable promise

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Insured not legally bound to any particular action in ins contract but insurer is legally obligated to pay losses covered by policy

Aleatory
Conditional
Unilateral

Unilateral

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If only one party to ins contract made enforceable promise

Adhesion
Conditional
Legal but unethical
Unilateral

Unilateral

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Ins contract requires both parties meet certain conditions in order for contract to be enforceable

Unilateral
Conditional
Contingent
Aleatory

Conditional

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Untrue statements on app unintentionally made by insureds that would alter decision of ins company

Warranties
Common errors
Material misrepresentations
Fraudulent statements

Material misrepresentations

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All info about app is identified in general info section of life ins app except

Age
Gender
Occupation
Education

Education

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Basic source in selection

App
Agents report
Warranty

Application

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Contains info regarding cause of death of applicant’s deceased relatives

Medical information part 2

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Guaranteed to be true or breach ins contract

Warranty
Concealment
Indemnity

Warranty

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Not included in general information section of app for ins

Medical background
Gender
Occupation

Medical background

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Wild underwriter not responsible for

Solicit business that will fall within insurer’s underwriting guidelines
Obtain appropriate signatures on app for ins
Issue policy that is requested
Help prevent adverse selection

Issue policy that is requested

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Part two of app for life ins provides questions regarding all except Recent surgeries Other ins coverages Family health history Alcohol and tobacco consumption

Other ins coverages

Agent fails to obtain applicant’s signature on app Send app to insurer with note explaining absence of signature Return app to applicant for signature Sign application for applicant Sign application stating it was by agent

Return for signature

As field underwriter producer responsible for all except Issue policy Obtain signatures on app for ins Help prevent adverse selection

Issue policy requested

When agent collects initial premium from applicant agent should issue Statement of good health Warranty Premium receipt

Premium receipt

Earliest policy may go into effect First premium is paid Insurer approves app App is signed and check given to agent

App signed and check given to agent

Applied for policy and paid initial premium Insurer issued a conditional receipt Five days later applicant had to submit to medical exam What is effective date Date of issue Date of application Date of medical exam Date of policy delivery

Date of medical exam

Receives conditional receipt but dies before policy is issued, insurer will Not pay policy under any circ Automatically pay proceeds Pay policy only if it would have issued the policy

Pay policy only if it would have issued the policy

Applied for ins and paid initial premium on aug 14 Issued a conditional rec During underwriting process ins company found no reason to reject risk or classify it other than as standard Killed in accident 22nd before issued Issue policy anyway and pay face value Negotiate reduced settlement Keep premium to y’s estate since has no obligation to pay

Issue policy anyway and pay face value to beneficiary

Purpose of conditional rec Guarantees policy issued in amount applied for Serves as proof that app has been determined insurable Given to apps who fully prepay the premium Intended to provide coverage on date prior to policy issue

Intended to provide coverage on date prior to policy issue

Agent known as field underwriter bc of info agent gathers for insurer to Reduce number of staff underwriters Comply with state law Pre select applicants that would present lowest risk of loss for insurer

Preselect applicants that would present the lowest risk of loss for insurer

When must insurable interest exist in life ins policy Time of app At time of policy delivery When change of beneficiary Time of loss

Time of application

Which is not example of valid insurable interest Debit in life of creditor Business partners in each other’s lives Employer in key employees life Child in parents lives

Debtor in life of creditor

Insurer receives a report regarding a potential insured that includes insured’s financial status hobbies habits Medical info bureau report Agent report Underwriter’s report Inspection report

Inspection report

Who is responsible for final risk selection Underwriters Executive officers Accountants Producers agents

Underwriters

Under fair credit reporting act if consumer challenges accuracy of info contained in consumer or investigative report reporting agency must Change report Sean actually copy of entire report to consumer Respond to consumer’s complaint Defend report if agency feels it is accurate

Respond to consumer’s complaint

Which of following reports will provide the underwriter with info about ins applicant’s credit Consumer report Inspection report Agent’s report Any federal report

Consumer report

If consumer challenges the accuracy of info contained in consumer or investigative report reporting agency must Change report Send certified copy of report to consumer Respond to consumers complaint

Respond to consumer’s complaint

Federal fair credit reporting act Protects customer privacy Regulates telemarketing Regulates consumer reports

Regulates consumer reports

Ho makes up medical information bureau Insurers Hospitals Former insured

Insurers

Maximum penalty for habitual willful noncompliance with fair credit reporting act 2500 1000 Revocation of license

2500

How long does insurer have to notify consumer that consumer report will be obtained 3 days 4 days 5 days

Three days

Applicant who receives preferred risk classification qualifies for Higher premiums than one with standard risk Lower premiums than one with standard risk Dividends payable for lack of claims Higher premiums than one with substandard risk

Lower premiums than person who receives a standard risk

Describes standard risk classification in same age group with similar lifestyles Standard risk is representative of majority of ppl Standard risk pays higher premium Standard risk requires extra rating

Standard risk is representative of majority of people

Results in highest premium Substandard risk Standard risk Preferred risk All risks pay equal premiums

Substandard risk

Stranger originated life ins policies are in direct opposition to principal of Good faith Insurable interest Indemnity Law of large numbers

Insurable interest

In classifying a risk home office underwriting department will look at all except Past medical history Present physical condition Present occupation Past income

Past income

Best details underwriting process for life ins Issuance of policies Reporting and rejection of risks Selection classification and rating of risks

Selection classification and rating of risks

Investor buys life policy on elderly person in order to sell it for a life settlement Visit cal settlement Third party ownership STOLI policy Prearranged funeral plan

STOLI stranger originated life insurance

Another name for substandard risk classification is Controlled Declinedelevated Rated

Rated

Specific info about policy Policy summary Illustrations Buyers guide

Policy summary

Agent and applicant for policy fill out and sign app. Applicant does not wish to give initial premium and no conditional rec is issued. When is coverage On app date When agent submits app to company and when company issues a conditional receipt When agent delivers policy collects initial premium and applicant completes an acceptable statement of good health

When the agent delivers the policy collects the initial premium and applicant completes an acceptable statement of good health

Explains life ins in general terms in order to assist applicant in process Buyers guide Insurance index Policy summary

Buyers guide

Included in policy summary Primary and secondary beneficiary designations Copies of illustrations and app Premiums amounts and surrender values

Premium amounts and surrender values

High documents delivered to policyowner includes info about premium accts cash values surrender values and death benefits for specific policy years Buyers guide Policy summary Notice regarding replacement Privacy notice

Policy summary

One frame for filing relevant suspicious activity reports 30 days of initial discovery 30 days of suspicious transaction 90 days of initial discovery

30 days of initial discovery

If policy includes a free look period of at least 10 days the buyers guide may be delivered to applicant no later than Within 30 days after first premium payment was collected Prior to filling out an app for insurance With the policy

With the policy