Ch. 1 Life insurance

contract of adhesion

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?

when the insurance application is submitted

in insurance, when is the offer usually made on a contract

investigative consumer report

What type of report may be used to assess risks associated with an applicant's lifestyle and character?

the fair credit reporting act

What law protects consumers from the circulation of inaccurate or obsolete information?

the agent

if an application does not receive a copy of the new insurance policy, who would be held responsible?

policy summary

what document describes the specific info abt a policy

risk selection

what is the main responsibility of a company’s underwriting unit?

Send the application back to the applicant for signature

If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?

When it may alter the underwriting decision

When would a misrepresentation be considered material?

What is the purpose of the agent's report during the application process?

The agent's report discusses the agent's personal observations about the proposed insured that may help in the underwriting process.

the date of the application

If the full premium was submitted with the application and the policy was issued as requested, what is the effective date of coverage?

Complete a new application or ask the applicant to initial the correction on the original application

When a change needs to be made on the application for insurance, which is the bes method for correcting the information?

insurance

what do individuals use to transfer their risk of loss to a larger group

insurable interest and consent

what two elements are necessary for a life insurance contract to have a legal purpose?

insurers

what entities make up the medical information bureau?

Provide the applicant a Disclosure Authorization Notice

If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?

When the insurer approves a prepaid application

In forming an insurance contract, when does an acceptance usually occur?

at the time of application

when must insurable interest exist in a life insurance policy

underwriting

What is the name of the process that insurance companies use to determine whether or not an applicant is insurable?

return the application to the applicant for completion

what is the best way to handle incomplete insurance applications?

preferred risk

what risk classification would typically qualify for lower premiums?

only one party makes a legally enforceable promise.

insurance contracts are unilateral. what does that mean?

The existence of insurable interest between the applicant and the insured

If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern?

what is policy replacement?

a new policy is issued while an existing policy is terminated or reissued w/ a reduction in cash value

underwriting

during which stage in the insurance process do insurers evaluate information that identifies adverse selection risks?

at the time of the policy delivery

when must the policy summary for a life insurance policy be delivered to the policy owner?

the policyowner

who must have insurable interest in the insured?

an absolutely true statement upon which the validity of the insurance contract is based

what is a warranty in an insurance contract

standard, substandard, & preferred

what are the three types of risk rating classifications in life insurance

Agreement (offer and acceptance), consideration, competent parties, and legal purpose.

What are the four elements of an insurance contract?

the agents

whose responsibility is it to determine that all the questions on an insurance application are answered?

premium

what term describes the fee a person pays an insurance company to receive coverage?

Either on the date of the application or the date of the medical exam (whichever occurs last)

At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?

loss

insurance is a contract that protects the insured from what?

unilateral

In 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?

investigative consumer report

What type of report provides information about the applicant's hobbies, habits and financial status?

insurance underwriting

the process of risk selection and classification

when it is intentional and material

when would a misrepresentation on an insurance application be considered fraud?

may be either personally delivered by an agent or mailed

how may insurance policies be delivered by an agent or mailed

Through interviews with the applicant's associates, friends and neighbors

How is the information obtained for an investigative consumer report?

adverse selection

People who are more likely to submit insurance claims are seeking insurance more often than preferred risks.

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

agent/producer

who is a field underwriter

insurer’s consideration

the promise to pay for losses; payment of premium & statements on application

representations

insured’s statements on the application

statements believed to be true

insurers cannot refuse coverage soley on the basis

of adverse info on an MIB report

the higher the premium

the higher the risk

no coverage

no premium

generic info on various types of policies

a buyers guide provides

aleatory

exchange of unequal amounts