Notes

Flash Cards


Completing the Application, Underwriting, and Delivering the Policy

Flash Cards.

Q: When a change needs to be made on the application for insurance, which is the best method for correcting the information?
A: Complete a new application or ask the applicant to initial the correction on the original application
Q: What is the main responsibility of a company's underwriting unit?
A: Risk selection
Q: What is the name of the process that insurance companies use to determine whether or not an applicant is insurable?
A: Underwriting
Q: What is the purpose of the agent's report during the application process?
A: The agent's report discusses the agent's personal observations about the proposed insured that may help in the underwriting process.
Q: What is adverse selection?
A: People who are more likely to submit insurance claims are seeking insurance more often than preferred risks.
Q: What are the three types of risk rating classifications in life insurance?
A: Standard, substandard and preferred
Q: What entities make up the Medical Information Bureau?
A: Insurers
Q: What are the four elements of an insurance contract?
A: Agreement (offer and acceptance), consideration, competent parties, and legal purpose
Q: What is insurance underwriting?
A: The process of risk selection and classification
Q: What type of report provides information about the applicant's hobbies, habits and financial status?
A: Investigative consumer report
Q: What two elements are necessary for a life insurance contract to have a legal purpose?
A: Insurable interest and consent
Q: What term describes the fee a person pays an insurance company to receive coverage?
A: Premium
Q: If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?
A: Provide the applicant a Disclosure Authorization Notice
Q: When would a misrepresentation be considered material?
A: When it may alter the underwriting decision
Q: In health 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?
A: Unilateral
Q: In insurance, when is the offer usually made on a contract?
A: When the insurance application is submitted
Q: Health contracts are prepared by insurers and must be accepted by the insured on an as is basis. This describes what aspect of a health insurance contract?
A: Contract of adhesion
Q: In forming an insurance contract, when does an acceptance usually occur?
A: When the insurer approves a prepaid application
Q: What do individuals use to transfer their risk of loss to a larger group?
A: Insurance
Q: What is a warranty in an insurance contract?
A: An absolutely true statement upon which the validity of the insurance contract is based
Q: What risk classification would typically qualify for lower premiums?
A: Preferred risk
Q: How can health insurance policies be delivered to the insured?
A: Personally delivered by the agent or mailed
Q: What document describes the specific information about a policy?
A: Policy summary
Q: If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?
A: Send the application back to the applicant for signature
Q: At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?
A: Either on the date of the application or the date of the medical exam (whichever occurs last)
Q: How is the information obtained for an investigative consumer report?
A: Through interviews with the applicant's associates, friends and neighbors
Q: When must insurable interest exist in a life insurance policy?
A: At the time of application
Q: Who is a field underwriter?
A: Agent/Producer
Q: When would a misrepresentation on an insurance application be considered fraud?
A: When it is intentional and material
Q: What is policy replacement?
A: A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value
Q: When does an insurance policy go into effect?
A: When the policy is delivered and the premium is paid
Q: If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern?
A: The existence of insurable interest between the applicant and the insured
Q: What report is used to assess risk associated with a health insurance applicant's lifestyle and character?
A: Investigative Consumer Report
Q: What is the best way to handle incomplete insurance applications?
A: Return the application to the applicant for completion
Q: Whose responsibility is it to determine that all the questions on an insurance application are answered?
A: The agent's
Q: If an applicant does not receive a copy of the new insurance policy, who would be held responsible?
A: The agent
Q: Insurance is a contract that protects the insured from what?
A: Loss
Q: What law protects consumers from the circulation of inaccurate or obsolete information?
A: The Fair Credit Reporting Act
Q: During which stage in the insurance process do insurers evaluate information that identifies adverse selection risks?
A: Underwriting
Q: Who must have insurable interest in the insured?
A: The policyowner
Q: Health insurance contracts are unilateral. What does that mean?
A: Only one party makes a legally enforceable promise
Q: When must the policy summary for a life insurance policy be delivered to the policyowner?
A: At the time of policy delivery
Q: What are the three main instances when insurable interest exists in life insurance?
A: 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
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