life 3 Flashcards
(44 cards)
An applicant’s medical information received from the Medical Information Bureau (MIB) may be furnished to the:
applicant’s spouse
agent
applicant’s physician
National Association of Insurance Commissioners (NAIC)
The correct answer is “applicant’s physician”. Information received from the Medical Information Bureau about a proposed insured may be released to the proposed insured’s physician.
D the agent met with a prospect and ended up selling an insurance policy. While filling out the insurance application, D makes a mistake. In this situation, D MUST
request that the insurer issue the policy with a rating
correct the information with no further action from prospect necessary
receive a verbal acknowledgement from prospect of the mistake made
correct the information and have the prospect initial the change
The correct answer is “correct the information and have the prospect initial the change “. If an agent makes an error on an insurance application the agent must correct the information and have the applicant initial the changes.
Life insurance companies are required to establish and maintain an anti-money laundering compliance program according to which federal regulation?
Fair Credit Reporting Act
Dodd-Frank Act
USA Patriot Act
Federal Reserve Act
The correct answer is “USA Patriot Act”. The USA PATRIOT Act includes provisions intended to prevent the financial services industry, including the insurance sector, from being used for money laundering and terrorist financing by criminals and terrorists.
Which of these do NOT constitute policy delivery?
Policy mailed to applicant
Policy delivered to the applicant by the agent
Policy issued with a rating
Policy mailed to agent
The correct answer is “Policy issued with a rating”. All of these constitute delivery of the policy EXCEPT issuing a rated policy.
On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to his doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?
Collect initial premium and leave a binding receipt
Collect initial premium along with a signed health statement
Explain to the applicant the policy is no longer in effect due to change in health condition
Collect initial premium
In this situation, the producer should deliver the policy and obtain the premium payment along with a signed health statement
T applies for a life insurance policy and is told by the producer that the insurer is bound to the coverage as of the date of the application or medical examination, whichever is later. Assuming that T is an acceptable risk, what item is given to T?
Backdated receipt
Conditional receipt
Binding receipt
Warranty receipt
The correct answer is “Conditional receipt”. A conditional receipt binds the insurer to coverage as of the date of the application or medical exam, provided the proposed insured is determined to be an acceptable risk.
What is the initial source of underwriting for an insurance policy?
Medical exam
Application containing statements from the insured
MIB report
Credit report
The correct answer is “Application containing statements from the insured”. The initial source of underwriting for an insurance policy is the application containing statements from the insured.
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the policy is issued
The date of policy delivery
When the conditions of the receipt are met
The date the sales appointment was set
The correct answer is “When the conditions of the receipt are met”. A conditional receipt indicates that certain conditions must be met in order for the insurance coverage to go into effect.
Information obtained from a phone conversation to the proposed insured can be found in which of these reports?
MIB report
Inspection report
Attending physician’s report
Agent’s report
The correct answer is “Inspection report”. An inspection report may include information obtained by a telephone call to the proposed insured.
ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has:
committed an act of fraud
assigned the risk to a reinsurer
issued a voidable policy
waived one of its legal rights
The correct answer is “waived one of its legal rights”. If an insurer accepts an application that contains unanswered questions and makes the application part of the life contract, the company has waived one of its legal rights.
What action should a producer take if the initial premium is NOT submitted with the application?
Keep the application until premium is paid
Forward the application to the insurer without the initial premium
Forward the application to the insurer after giving the applicant a conditional receipt
Forward the application to the insurer after giving the applicant a binding receipt
The correct answer is “Forward the application to the insurer without the initial premium”. In this situation, the producer should submit the application to the insurance company without the premium. However, if a premium is not paid with the application, the policy will not become valid until the initial premium is collected.
An incomplete life insurance application submitted to an insurer will result in which of these actions?
Application will be approved with restrictions
Application will be automatically declined
Application will be pending until a MIB report is sent to the insurer
Application will be returned to the writing agent
The correct answer is “Application will be returned to the writing agent”. If the company discovers a mistake or incompletion, it usually returns the application to the producer.
An underwriter determines that a life insurance applicant’s risk should be reclassified due to a health issue. This policy may be issued with a(n):
extra premium
extended Contestable period
Concealment clause
exclusion for the medical condition
The correct answer is “extra premium”. In this situation, the policy may be issued with an extra premium.
Which of these actions should a producer take when submitting an insurance application to an insurer?
Disclose to the applicant the amount of commissions to be earned on this transaction
Inform insurer of relevant information not included on the application
Arrange for a copy of the Attending Physician Statement (APS) to be sent to the producer
Issue a binding receipt to applicant if no initial premium is submitted
The correct answer is “Inform insurer of relevant information not included on the application”. One of the actions a producer should take when submitting an application is to advise the insurer of any other relevant information not contained in the application.
At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid?
After the Contestable period
When the policy proceeds are paid
When the insured dies
At the time of application
The correct answer is “At the time of application”. With life insurance, insurable interest must exist only at the policy inception.
Insurance policies are considered aleatory contracts because
both parties consent to the contract
they are “take it or leave it” contracts
the contract is voidable upon proof of fraud
performance is conditioned upon a future occurrence
The correct answer is “performance is conditioned upon a future occurrence”. Insurance contracts are aleatory. This means there is an element of chance and potential for unequal exchange of value or consideration for both parties. An aleatory contract is conditioned upon the occurrence of an event.
he USA Patriot Act was enacted in:
2003
2002
2004
2001
The correct answer is “2001”. The USA Patriot Act was enacted in 2001 to detect and deter terrorism.
Life and health insurance policies are:
Bilateral contracts
Unilateral contracts
Non-lateral contracts
Multi-lateral contracts
The correct answer is “Unilateral contracts”. Life and health insurance policies are considered unilateral contracts because one party makes a promise, and the other party can only accept by performance.
K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?
Binding
Contingent
Initial Premium
Conditional
The correct answer is “Conditional”. A conditional receipt indicates that certain conditions must be met in order for the insurance coverage to go into effect.
Which of these terms accurately defines an underwriter’s assessment of information on a life insurance application?
Inspection report
Insurable interest
Risk classification
Warranty review
The correct answer is “Risk classification”. Underwriting, another term for risk selection, is the process of reviewing the many characteristics that make up the risk profile of an applicant to determine if the applicant is insurable and, if so, at standard or substandard rates.
Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy February 13. How will the insurer handle this situation?
Premium will be fully refunded minus a prorated amount for the period of February 7 - February 13
Policy was not returned within the free-look period, premium will not be refunded
Premium will be fully refunded minus a surrender charge
Policy was returned within the free-look period, premium will be fully refunded
The correct answer is “Policy was returned within the free-look period, premium will be fully refunded”. The free- look period begins when the policy is delivered to policyowner.
Which of these is NOT considered to be an element of an insurance contract?
acceptance
negotiating
consideration
the offer
The correct answer is “negotiating”. The elements of an insurance contract do not include negotiating.
T is given a receipt after completing a life insurance application and paying the initial premium. Under this situation, T’s coverage is
guaranteed, no matter what is found during the underwriting process
conditional, depending on the insurer’s underwriting guidelines
effective upon completion of the Free-Look period
effective upon delivery of the policy
The correct answer is “conditional, depending on the insurer’s underwriting guidelines”. In this situation, the life insurance coverage is conditional, depending on the insurer’s underwriting guidelines.
Why must an insurance applicant answer all questions on the application?
The National Association of Insurance Commissioners (NAIC) requires all questions be answered
The Medical Information Bureau (MIB) requires this for an insurer to be a member
Statements and representations on the application are part of the consideration for issuing a policy
Statements and representations are considered guarantees
The correct answer is “Statements and representations on the application are part of the consideration for issuing a policy”. The application statements and representations are part of the consideration for issuing a policy.
