Chapter 1. Completing the application, underwriting and completing the policy

Who must have insurable interest in the insured?

The policyowner

When must the policy summary for a life insurance policy be delivered to the policyowner?

At the time of policy delivery

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

Investigative consumer report

In insurance, when is the offer usually made on a contract?

When the insurance application is submitted

What is the main responsibility of a company's underwriting unit?

Risk selection

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

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

Send the application back to the applicant for signature

What is a warranty in an insurance contract?

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

What is policy replacement?

A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value

What is adverse selection?

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

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

The date of the application

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

Underwriting

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

Provide the applicant a Disclosure Authorization Notice

When must insurable interest exist in a life insurance policy?

At the time of application

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

Insurable interest and consent

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

The existence of insurable interest between the applicant and the insured

What document describes the specific information about a policy?

Policy summary

What are the three types of risk rating classifications in life insurance?

Standard, substandard and preferred

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

Insurance

What are the four elements of an insurance contract?

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

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

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

What is the best way to handle incomplete insurance applications?

Return the application to the applicant for completion

When would a misrepresentation be considered material?

When it may alter the underwriting decision

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

Underwriting

Insurance contracts are unilateral. What does that mean?

Only one party makes a legally enforceable promise.

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

The agent's

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?

Contract of adhesion

What risk classification would typically qualify for lower premiums?

Preferred risk

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

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

What is insurance underwriting?

The process of risk selection and classification

How is the information obtained for an investigative consumer report?

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

What entities make up the Medical Information Bureau?

Insurers

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

The Fair Credit Reporting Act

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

Premium

Insurance is a contract that protects the insured from what?

Loss

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?

Unilateral

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

When it is intentional and material

How may insurance policies be delivered to insureds?

They may be either personally delivered by an agent or mailed.

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

When the insurer approves a prepaid application

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

Investigative Consumer Report

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.

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

The agent

Who is a field underwriter?

Agent/Producer