Chapter 3

Question 1

Name the receipt that provides coverage “as long as a specific condition has been met or performed.”

Answer 1

A conditional receipt

Question 2

How does the Percentage of Normal Rate method work?

Answer 2

By simply increasing the premium by a percentage of the standard rate

Question 3

If proven untrue, may information obtained through a credit check be used to deny an application?

Answer 3

Untrue information obtained through a credit check may not be used to deny an application.

Question 4

If requested by an applicant, what credit information must be provided to the applicant?

Answer 4

The information report, the source of information, and how to challenge the information.

Question 5

A _________ party contract requires three signatures.

Answer 5

Third

Question 6

What does the delivery of a policy to an insured constitute?

Answer 6

Policy issue and acceptance

Question 7

What is another name for an average or ordinary risk?

Answer 7

Standard risk

Question 8

When does coverage begin if a policy has a conditional receipt based upon insurability?

Answer 8

Coverage begins on the receipt date provided the application is approved as applied for.

Question 9

What individual has better than average risk?

Answer 9

A preferred risk

Question 10

What is the rating method that increases premiums by increasing the age classification of the insured?

Answer 10

The step-up-in-age rating method

Question 11

List some approved policy delivery methods.

Answer 11

Certified registered mail, first class mail with signed receipt, and personal delivery

Question 12

When is a Trial Application used?

Answer 12

When an application is submitted to the insurer without an initial premium

Question 13

When may changes to an application be made?

Answer 13

Changes may only be made prior to application submission.

Question 14

What are Representations?

Answer 14

Statements made by an applicant when answering questions on the application

Question 15

A ____________ application requires no information other than what is provided by the applicant.

Answer 15

Nonmedical

Question 16

T/F: An agent may not make changes to a life insurance application.

Answer 16

T; Technically, only the applicant may make changes, and only prior to the application being submitted

Question 17

What type of receipt provides coverage only on the date the application is approved?

Answer 17

An approval type conditional receipt

Question 18

When should the agent review and collect signature on a Notice Regarding Replacement form?

Answer 18

No later than time of application

Question 19

At policy delivery, what should the agent review with the insured?

Answer 19

Coverage, coverage effective date, provisions, beneficiaries, premium, exclusions, riders and ownership rights

Question 20

Who is the field underwriting agent?

Answer 20

The agent who determines which risks are desirable and submits them to the underwriting department for approval

Question 21

The MIB is an inter company ________ bank that stores information collected from previous ___________.

Answer 21

Data; applications

Question 22

If a conditional receipt requires the applicant to take a medical exam, when is the earliest date coverage may begin?

Answer 22

The date of the exam itself

Question 23

When should an agent review the possibility of various background checks such as credit, MIB, or HIV?

Answer 23

At time of original application

Question 24

An insurability type conditional receipt, dated 6/15, is approved as applied for on 9/1. When did coverage begin?

Answer 24

6/15. With conditional type receipt, coverage is effective on date of application if policy is issued as applied for.

Question 25

Whenever a premium is paid by an applicant, the agent should provide a _________.

Answer 25

Receipt

Question 26

An approval type conditional receipt, dated 6/15, is approved on 9/1 as applied for. When did coverage become effective?

Answer 26

On 9/1, the date the policy is approved

Question 27

Name some items that effect policy premium.

Answer 27

Age, gender, health, occupation, hobbies, habits, family health, and travel outside of country

Question 28

What is the primary source of underwriting information?

Answer 28

The original application

Question 29

What is the principal tool used in determining an individuals eligibility for insurance coverage?

Answer 29

The application

Question 30

Define the term warranty.

Answer 30

A statement made by an applicant that is guaranteed to be absolutely true

Question 31

In order to represent an insurer, an agent must be __________ by that company.

Answer 31

Appointed

Question 32

What are some of the negative results of submitting an incomplete application?

Answer 32

It’s unprofessional, creates issuance delays, and may result in business lost to competitors or in lost commissions

Question 33

Identify the acronym: APS

Answer 33

Attending Physicians Statement

Question 34

What does the Fair Credit Reporting Act allow?

Answer 34

It gives a consumer or applicant the right to dispute credit reporting information

Question 35

Which would have a lower premium, a standard or substandard risk?

Answer 35

A standard risk would have a lower premium

Question 36

When does coverage begin on a conditional receipt policy?

Answer 36

If the application is approved as applied for, coverage is immediately provided

Question 37

What information may be found in Section 1 of a life insurance policy?

Answer 37

Name, address, DOB, salary, and occupation of the applicant

Question 38

T/F: Women statistically live longer than men; therefore, they have lower life insurance premiums.

Answer 38

T

Question 39

What is the purpose of the MIB?

Answer 39

To compare collected health information in order to avoid adverse selection

Question 40

An applicant’s health history is usually found in _________ of a life insurance policy.

Answer 40

Section 2

Question 41

Who pays for the cost of an applicant’s medical exams and lab fees?

Answer 41

The insurer underwriting the application

Question 42

T/F: Anyone may gain access to MIB information.

Answer 42

F; Access is only available to approved company representatives/underwriters

Question 43

Who is a substandard risk?

Answer 43

An individual with higher than average risk

Question 44

Where would an agent record personal observations regarding the applicant?

Answer 44

In the agent report

Question 45

When must the applicant be notified that consumer/credit background checks will be performed?

Answer 45

Within three days following a request for information

Question 46

What methods are used to insure a substandard risk?

Answer 46

Higher premium, exclusion rider, lower benefit, and lower benefit time frame

Question 47

Is signed authorization required from the applicant in order to test for the HIV virus?

Answer 47

Yes

Question 48

Is coverage provided during the grace period?

Answer 48

Yes

Question 49

What is a declined risk?

Answer 49

An application for insurance that has been turned down

Question 50

What is a binding receipt?

Answer 50

One that provides immediate or unconditional coverage on the date the premium is received

Question 51

For applications submitted without premium, applicants must pay premium and complete a _________________.

Answer 51

Statement Regarding Good Health

Question 52

What tables predict the probability of death?

Answer 52

Mortality tables

Question 53

What is the most common method used to insure a substandard risk?

Answer 53

Charging higher premiums

Question 54

When does the “Notice to the Applicant” regarding the Fair Credit Reporting Act need to be given?

Answer 54

At the time of application

Question 55

T/F: The producer issues the insurance policy.

Answer 55

F; Producers solicit appointments, complete applications, collect premiums, and submit applications for approval

Question 56

What is a morbidity table?

Answer 56

A table used to predict the probability of illness or disability

Question 57

What provision begins on the date a policy is delivered to an insured?

Answer 57

The free-look provision

Question 58

The date listed on a receipt will always be a date that is __________ than the policy issue date.

Answer 58

Earlier

Question 59

What are the primary duties of an underwriter?

Answer 59

Assess risk, approve or deny applications, determine premiums, and protect the insurer against adverse selection