A life insurance policy is being applied for on Z's life. In order for the contract to be valid, all of the following have an insurable interest and could be the owner of the policy, except:
Z's neighbor.
Buyer's Guide:
A generic brochure developed by the NAIC (National Association of Insurance Commissioners) To assist prospective buyers of life insurance. Descriptions of all basic types of life insurance as well as comparative costs of each are included.
Policy Summary:
A computer-generated illustration detailing the premiums (current and guaranteed) to be paid, current and guaranteed interest rates, guaranteed and non-guaranteed values, any projected dividends, and the producer/insurer's name and address.
Information from a third party collected by the insurance company in the application for insurance and during underwriting of the policy may be subject to the jurisdiction of which of the following?
Fair Credit Reporting Act (FCRA)
Conservation is the act of:
Saving or keeping the existing policy and preventing it from being replaced.
The ____________ is the insurer that issued the current policy to be replaced.
Existing Insurer
The ___________ is the insurer responsible for using the new policy that will replace the existing policy.
Replacing Insurer
HIPPA's privacy rules are implemented to:
Protect the privacy of all individually identifiable health information.
Which of the following is NOT required to sign a completed application?
Beneficiary
If the initial premium is paid at the time of application, the producer will issues a:
Conditional Receipt
The Conditional Receipt provides that coverage will become effective as of either the date of application or the ________________________.
Date of completion of any required medical exam.
A ___________________ provides immediate coverage if the premium is paid at the time of application.
Binding (Unconditional) Receipt
C.O.D stands for:
Collect on delivery
An application for insurance is completed and submitted to an insurance company. In order for coverage to be effective immediately, all of the following conditions must be met, except:
The policy is issued at a higher risk than the standard risk applied for.
Underwriting is the process of:
selection, classification, and rating (the process of determining is someone is insurable).
The purpose of underwriting is to detect:
adverse selection (unhealthy or high risk applicants)
The ____________________ include the application, medical exams, an Attending Physician's statement, the Medical Information Bureau (MIB), an inspection report, and the agent's report.
sources of underwriting
Part 1 of the application:
sex/gender, marital status, residence, date of birth, occupation, and past and present life insurance.
Part 2 of the application:
contains questions pertaining to medical background, past and present health, any medical visits, medication, height/weight, hospitalizations, or surgeries in recent years, medical status of immediate family members, including their ages and causes of dea
Medical exams are at the ________ expense.
Insurer's.
An _______________________________ is used in cases in which the individual application and/or medical reports reveal conditions for which further information is necessary to determine insurability.
Attending Physician Statement (APS)
The insurer is responsible for all costs associated with the completion of the ___.
APS
Which of the following is not true about life insurance applications?
Confidential communication between the agent and the insurer.
The MID, Inc. (Medical Information Bureau) Report is:
primarily used to collect adverse medical information about an applicant's health and act as an information exchange.
MID alerts underwriters to:
fraud, errors, omissions or misrepresentations made of insurance applications.
MIB can help _____ the cost of life and health insurance for consumers.
Lower.
MIB's reports represent general medication information and other conditions, such as:
hazardous hobbies and adverse driving records.
An ___________ ________ is a general report of the applicant's finances, character, morals, work, hobbies, and other habits. (can be referred to as a Consumer Investigative Report)
Inspection Report
An ______ ______ is a personal statement submitted by the producer, to the insurer, regarding the applicant's financial condition, any personal knowledge of the applicant, etc. (remains confidential between the producer and the insurer)
Agent's Report
If an applicant has engaged in high-risk hobbies (sky-diving, scuba diving, motorcycle racing), a _______________________________ will be required to determine risk and frequency.
Special Hazardous Activity Questionnaire
All of the following statements regarding sources of underwriting are correct, except:
The applicant may be denied coverage based solely on the MIB report.
Underwriting involves _________ of the applicant to determine if he/she is acceptable for the proposed insurance.
analysis.
Individual underwriting factors may include:
Age, gender, tobacco use, occupation, hobbies, physical condition, health history.
Risk classifications include:
Standard Risks, Preferred Risks, Substandard Risks (higher risk exposure), and declined.
Standard Risks:
Individuals who have the same health, habits, sex/gender, and occupational characteristics as those reflected in the mortality table. Individuals in this category have an average life expectancy.
Preferred Risks:
Individuals who meet certain requirements and qualify for lower premiums because of ideal health, height, and weight. Individuals in this category have a longer than average life expectancy.
Substandard Risks (Higher Risk Exposure):
Individuals who are not acceptable at standard rates because of poor health, bad habits or occupational hazards. Individuals in this category are issued "rated policies" known as surcharges.
Declined
This is not a rating classification, but a decision that the risk is one for which the insurer refuses to issue insurance. In this case the applicant is deemed uninsurable.
Being declined by one insurance company ______ a person will be declined by all other insurance companies.
does not mean
Premiums are based on:
expected mortality, interest, and expenses (used by all insurance companies).
Mortality Tables are used to give the company:
a basic estimate of how much money it will need to pay for death claims each year.
The higher the age group, the higher the mortality rate-
translating to a higher premium.
Males have a ______ mortality rate than women.
Higher (men will pay a higher rate)
The amount charged to cover each policy's share of expenses of operation (salaries, commission, premium taxes, and cost of doing business)
Expense loading.
Premium payments are made:
Either monthly, quarterly, semiannually, or annually.
Payment modes other than annual may result in higher premiums to offset the:
lost interest earnings and increased administration costs.
Which of these modes would result in the insured paying the least annual outlay for life insurance?
Annual
The producer is expected to explain the policy to ensure the policyowner/insured understands:
the benefits, including any ratings, endorsements, exclusions, and riders.
_____________ delivery occurs when the insurer issues the policy, as long as the premium was paid at the time of application.
Constructive
_________ delivery occurs when the producer delivers the policy to the owner or insured.
Legal
The insurer may issue a policy with a surcharge(higher rating) or
exclusion to the policy.
Statement of Good Health..
must be obtained signed by the insured, to verify health has remained the same since the time of application.
Policy delivery will be accomplished by:
1) personal delivery, with signed receipt of delivery
2) registered or certified mail with a signed receipt of delivery
A producer provided a conditional receipt to an applicant on May 5 at the time of an application based on a standard risk. The insurer required a routine medical exam, which was completed on May 15. The policy was issued based on a substandard risk on May
May 22.
Underwriting Process:
Classification of risk and rating, insurability is determined, MIB report may be requested.
Policy Delivery:
Constructive delivery, producer explains rating, premiums, coverages, and policy benefits, Statement of Good Health
Completing the Application:
required signatures, conditional receipt may be issued, formal request for the insurer to issue a policy.
Viatical Settlements:
Policy may be purchased by a third party form a terminally ill insured providing immediate cash prior to death.
when producer Pete delivers a policy, he should also do which of the following
explain the policy fully