Chapter 1

Question 1

When would a misrepresentation be considered material?

Answer 1

When it may alter the underwriting decision

Question 2

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

Answer 2

Risk selection

Question 3

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

Answer 3

Send the application back to the applicant for signature

Question 4

What is a warranty in an insurance contract?

Answer 4

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

Question 5

When does an insurance policy go into effect?

Answer 5

When the policy is delivered and the premium is paid

Question 6

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

Answer 6

When the insurance application is submitted

Question 7

When must insurable interest exist in a life insurance policy?

Answer 7

At the time of application

Question 8

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

Answer 8

Investigative Consumer Report

Question 9

Insurance contracts are unilateral. What does that mean?

Answer 9

Only one party makes a legally enforceable promise.

Question 10

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

Answer 10

The agent’s

Question 11

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

Answer 11

Underwriting

Question 12

What is insurance underwriting?

Answer 12

The process of risk selection and classification

Question 13

Who must have insurable interest in the insured?

Answer 13

The policyowner

Question 14

How may insurance policies be delivered to insureds?

Answer 14

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

Question 15

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

Answer 15

At the time of policy delivery

Question 16

Who is a field underwriter?

Answer 16

Agent/Producer

Question 17

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

Answer 17

Standard, substandard and preferred

Question 18

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

Answer 18

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

Question 19

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

Answer 19

Investigative consumer report

Question 20

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 20

The existence of insurable interest between the applicant and the insured

Question 21

How is the information obtained for an investigative consumer report?

Answer 21

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

Question 22

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

Answer 22

Underwriting

Question 23

What entities make up the Medical Information Bureau?

Answer 23

Insurers

Question 24

What risk classification would typically qualify for lower premiums?

Answer 24

Preferred risk

Question 25

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 25

Unilateral

Question 26

What are the four elements of an insurance contract?

Answer 26

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

Question 27

Insurance is a contract that protects the insured from what?

Answer 27

Loss

Question 28

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

Answer 28

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

Question 29

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

Answer 29

When it is intentional and material

Question 30

What is adverse selection?

Answer 30

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

Question 31

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

Answer 31

The agent

Question 32

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

Answer 32

Provide the applicant a Disclosure Authorization Notice

Question 33

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

Answer 33

The Fair Credit Reporting Act

Question 34

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

Answer 34

When the insurer approves a prepaid application

Question 35

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

Answer 35

Insurance

Question 36

What is the best way to handle incomplete insurance applications?

Answer 36

Return the application to the applicant for completion

Question 37

What is policy replacement?

Answer 37

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

Question 38

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 38

Contract of adhesion

Question 39

What document describes the specific information about a policy?

Answer 39

Policy summary

Question 40

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

Answer 40

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

Question 41

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

Answer 41

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 42

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

Answer 42

Insurable interest and consent

Question 43

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

Answer 43

Premium

Question 44

If an insurer issued a policy based on the application that had unanswered questions what happens?

Answer 44

The policy will be void.

Question 45

What is NOT a requirement for life insurance illustrations?

Answer 45

They must be part of the contract.

Question 46

What type of insurers are owned by stockholders?

Answer 46

Stocks

Question 47

The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer would pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?

Answer 47

Conditional

Question 48

When must insurable interest exist in a life insurance policy?

Answer 48

At the time of policy delivery.

Question 49

What part of an insurance application would contain information regarding the cause of death of an applicants deceased realitives?

Answer 49

Medical Information

Question 50

Who has a higher percentage of interest earned on a policy?

Answer 50

Someone who is classified as having preferred risks.