Chapter 1

Question 1

When must the policy summary for a life insurance policy be delivered to the policyowner?

Answer 1

At the time of policy delivery

Question 2

When does an insurance policy go into effect?

Answer 2

When the policy is delivered and the premium is paid

Question 3

What are the three main instances when insurable interest exists in life insurance?

Answer 3

Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial obligation to the policyowner

Question 4

Who is a field underwriter?

Answer 4

Agent/Producer

Question 5

What two elements are necessary for a life insurance contract to have a legal purpose?

Answer 5

Insurable interest and consent

Question 6

What entities make up the Medical Information Bureau?

Answer 6

Insurers

Question 7

What type of report provides information about the applicant’s hobbies, habits and financial status?

Answer 7

Investigative consumer report

Question 8

Whose responsibility is it to determine that all the questions on an insurance application are answered?

Answer 8

The agent’s

Question 9

What is policy replacement?

Answer 9

A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value

Question 10

What do individuals use to transfer their risk of loss to a larger group?

Answer 10

Insurance

Question 11

What type of report may be used to assess risks associated with an applicant’s lifestyle and character?

Answer 11

Investigative Consumer Report

Question 12

What is a warranty in an insurance contract?

Answer 12

An absolutely true statement upon which the validity of the insurance contract is based

Question 13

What is insurance underwriting?

Answer 13

The process of risk selection and classification

Question 14

When would a misrepresentation on an insurance application be considered fraud?

Answer 14

When it is intentional and material

Question 15

Who must have insurable interest in the insured?

Answer 15

The policyowner

Question 16

When would a misrepresentation be considered material?

Answer 16

When it may alter the underwriting decision

Question 17

At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?

Answer 17

Either on the date of the application or the date of the medical exam (whichever occurs last)

Question 18

Insurance is a contract that protects the insured from what?

Answer 18

Loss

Question 19

What is the best way to handle incomplete insurance applications?

Answer 19

Return the application to the applicant for completion

Question 20

What risk classification would typically qualify for lower premiums?

Answer 20

Preferred risk

Question 21

During which stage in the insurance process do insurers evaluate information that identifies adverse selection risks?

Answer 21

Underwriting

Question 22

In forming an insurance contract, when does an acceptance usually occur?

Answer 22

When the insurer approves a prepaid application

Question 23

What are the four elements of an insurance contract?

Answer 23

Agreement (offer and acceptance), consideration, competent parties, and legal purpose

Question 24

If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter’s main concern?

Answer 24

The existence of insurable interest between the applicant and the insured

Question 25

If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?

Answer 25

Provide the applicant a Disclosure Authorization Notice

Question 26

What is adverse selection?

Answer 26

People who are more likely to submit insurance claims are seeking insurance more often than preferred risks.

Question 27

What law protects consumers from the circulation of inaccurate or obsolete information?

Answer 27

The Fair Credit Reporting Act

Question 28

If an applicant does not receive a copy of the new insurance policy, who would be held responsible?

Answer 28

The agent

Question 29

What document describes the specific information about a policy?

Answer 29

Policy summary

Question 30

In insurance contracts, the insured is not legally bound to any particular action; however, the insurer is obligated to pay for losses covered by the policy. What contract element does this describe?

Answer 30

Unilateral

Question 31

If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?

Answer 31

Send the application back to the applicant for signature

Question 32

Insurance contracts are unilateral. What does that mean?

Answer 32

Only one party makes a legally enforceable promise.

Question 33

When a change needs to be made on the application for insurance, which is the best method for correcting the information?

Answer 33

Complete a new application or ask the applicant to initial the correction on the original application

Question 34

How may insurance policies be delivered to insureds?

Answer 34

They may be either personally delivered by an agent or mailed.

Question 35

What term describes the fee a person pays an insurance company to receive coverage?

Answer 35

Premium

Question 36

What is the main responsibility of a company's underwriting unit?

Answer 36

Risk selection

Question 37

What are the three types of risk rating classifications in life insurance?

Answer 37

Standard, substandard and preferred

Question 38

What is the purpose of the agent's report during the application process?

Answer 38

The agent's report discusses the agent's personal observations about the proposed insured that may help in the underwriting process.

Question 39

When must insurable interest exist in a life insurance policy?

Answer 39

At the time of application

Question 40

How is the information obtained for an investigative consumer report?

Answer 40

Through interviews with the applicant's associates, friends and neighbors

Question 41

In insurance, when is the offer usually made on a contract?

Answer 41

When the insurance application is submitted

Question 42

What is the name of the process that insurance companies use to determine whether or not an applicant is insurable?

Answer 42

Underwriting

Question 43

Insurance contracts are prepared by insurers and must be accepted by the insured on an as-is basis. This describes what characteristic of an insurance contract?

Answer 43

Contract of adhesion