Chapter 1: Completing the Application, Underwriting, and Delivering the Policy

What does insurance do?

Transfers the risk of loss from individual to insurer

What principle is insurance based on?

Indemnity, risk pooling, and law of large numbers

When must insurable interest exist?

At the time of application

Who can you have insurable interest in?

Yourself, family member, or business partner

When does an insurance policy go into effect?

When the policy is delivered and the premium is paid

What are the 4 elements of a legal insurance contract?

Agreement, consideration, competent parties, legal purpose

What is an adhesion contract?

Insurer writes it; insured must take it or leave it

What does 'aleatory' mean in insurance?

Unequal exchange of value

What does 'unilateral' mean in insurance contracts?

Only the insurer makes a legally enforceable promise

What does 'conditional' mean?

The policy requires conditions to be met

What are the main parts of field underwriting?

Application, agent's report, premium & receipt

What are key sources used in company underwriting

Application, consumer reports, MIB

What are the 3 risk classifications?

Preferred, Standard, Substandard

What 3 factors determine premiums?

Mortality, interest, expense

What happens to premiums when paid more frequently?

They increase

What must happen if premium wasn’t paid with application?

Collect premium + statement of good health upon delivery

What is the purpose of the Fair Credit Reporting Act (FCRA)?

Protect consumers from outdated/inaccurate info in reports