chapter 1 general concepts

Question 1

insurance

Answer 1

• transfers the risks of loss from an individual to an insurer
• based on the principle of indemnity (security/protection)
• based on the spreading of risk (risk pooling) and the law of large

Question 2

insurable interest

Answer 2

• must exist at the time of application
• insuring one’s own life, family member, or business partner

Question 3

field underwriter (by agent)

Answer 3

• application - completed and signed
• agents report - agents’ observations about the applicant that can assist in underwriting
• premiums with application and conditional receipts

Question 4

company underwriting

Answer 4

• multiple sources of information: application, consumer reports, MIB
• risk classification - 3 types of risks: standard, substandard, preferred

Question 5

premium determination

Answer 5

• 3 key factors for life insurance: mortality, interest, and expense
• mode - the more frequently premium is paid the higher the premium

Question 6

policy issue and delivery

Answer 6

effective date of coverage - if the premium is not paid t=with the application, the agent must obtain the premium and a statement of continued good health at the time of policy delivery