Chapter 1. Completing the Application, Underwriting, and Delivering the Policy Flashcards
What do individuals use to transfer their risk of loss to a larger group?
Insurance
Who must have insurable interest in the insured?
The policyowner
How may insurance policies be delivered to insureds?
They may be either personally delivered by an agent or mailed.
When does an insurance policy go into effect?
When the policy is delivered and the premium is paid
What are the three main instances when insurable interest exists in life insurance?
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
What is policy replacement?
A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value
What is adverse selection?
People who are more likely to submit insurance claims are seeking insurance more often than preferred risks.
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?
Contract of adhesion
What term describes the fee a person pays an insurance company to receive coverage?
Premium
During which stage in the insurance process do insurers evaluate information that identifies adverse selection risks?
Underwriting
In forming an insurance contract, when does an acceptance usually occur?
When the insurer approves a prepaid application
Insurance is a contract that protects the insured from what?
Loss
Who is a field underwriter?
Agent/Producer
What document describes the specific information about a policy?
Policy summary
When would a misrepresentation be considered material?
When it may alter the underwriting decision
What is the best way to handle incomplete insurance applications?
Return the application to the applicant for completion
What entities make up the Medical Information Bureau?
Insurers
When a change needs to be made on the application for insurance, which is the best method for correcting the information?
Complete a new application or ask the applicant to initial the correction on the original application
If an agent fails to obtain the applicant’s signature on the insurance application, what must the insurer do?
Send the application back to the applicant for signature
If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter’s main concern?
The existence of insurable interest between the applicant and the insured
When must the policy summary for a life insurance policy be delivered to the policyowner?
At the time of policy delivery
At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?
Either on the date of the application or the date of the medical exam (whichever occurs last)
In insurance, when is the offer usually made on a contract?
When the insurance application is submitted
Insurance contracts are unilateral. What does that mean?
Only one party makes a legally enforceable promise.
