Florida Life Insurance Sample Quiz

Questions and Answers

Which of the following best describes insurance?

Insurance is a method of saving money.

Insurance is the transfer of risk from a company to an individual.

Insurance requires no payment.

Insurance is the transfer of risk from an individual to an insurance company. (correct)

What is the term for something of value that each party gives to the other under an insurance contract?

Consideration

What is the basic source of information used by the company in the risk selection process?

Application

How long is the grace period in individual life insurance policies?

Usually a month (30 or 31 days) Signup and view all the answers

Who must have insurable interest in the insured?

Policyowner Signup and view all the answers

Who receives the death benefit from a life insurance policy?

Beneficiary Signup and view all the answers

Insurance transfers what?

Risk Signup and view all the answers

What is the effective date of a policy if an applicant applied for insurance, paid the initial premium, and was given a conditional receipt?

Date of the application or the date of the medical exam (whichever is later) Signup and view all the answers

Why should the producer personally deliver the policy?

To ensure understanding and answer all questions. Signup and view all the answers

Contracts prepared by one party and submitted on a take-it-or-leave-it basis are classified as what?

Contracts of adhesion Signup and view all the answers

Another name for a substandard risk classification is what?

Rated Signup and view all the answers

What happens if an applicant who has received a conditional receipt dies the next day?

The beneficiary will receive the full death benefit if the applicant qualified. Signup and view all the answers

What details the underwriting process for life insurance?

Selection, classification, and rating of risks. Signup and view all the answers

If an insurer issues a policy based on an application with unanswered questions, what is true?

The policy will be interpreted as if the insurer waived its right. Signup and view all the answers

What contract characteristic does it describe that insurance policies are not drawn up through negotiations?

Adhesion Signup and view all the answers

What is a generic consumer publication that explains life insurance?

Buyer's Guide Signup and view all the answers

What should an agent issue when collecting the initial premium?

Premium receipt Signup and view all the answers

When does policy coverage become effective if the full premium was submitted with the application?

As of the application date Signup and view all the answers

In classifying a risk, what is excluded from the underwriting department's considerations?

Applicant's past income Signup and view all the answers

If an applicant receives a preferred risk classification, what do they qualify for?

Lower premiums than a person receiving a standard risk Signup and view all the answers

Study Notes

Insurance Overview

Insurance is the transfer of risk from individuals or entities to an insurance company, which manages costs associated with unexpected losses across a larger pool of insured parties.

Consideration in Insurance Contracts

Consideration refers to something of value exchanged between the insured and insurer; the insured's consideration is the premium payment, while the insurer's consideration is the promise to pay in case of loss.

Risk Selection Process

The application serves as the primary source of information used by insurers for assessing risks during the selection process.

Grace Period in Policies

Individual life insurance policies typically have a grace period of 30 to 31 days for premium payment after the due date, allowing coverage to remain intact.

Insurable Interest Requirement

The policyowner must have an insurable interest in the insured's life, applicable to personal relationships or business partnerships.

Beneficiary Definition

A beneficiary is an individual or entity designated to receive the death benefit from a life insurance policy upon the insured's passing.

Risk Transfer

Insurance effectively transfers financial responsibility for potential losses, also referred to as risk, to the insurance company.

Effective Date of Coverage

Coverage begins on the application date or the date of a medical exam, whichever occurs later, provided the applicant is deemed insurable.

Role of Producers

Producers must personally deliver policies to ensure clarity and satisfaction for the insured regarding policy details, alongside obtaining a signed delivery receipt.

Contracts of Adhesion

Insurance policies are classified as contracts of adhesion, where terms are dictated by the insurer, limiting the insured's ability to negotiate provisions.

Substandard Risk Classification

A substandard risk classification is also termed "rated," as it typically results in higher premiums due to increased risk factors associated with the insured.

Conditional Receipt and Coverage

If a policy is issued with a conditional receipt and the applicant dies shortly after, the beneficiary will receive benefits if the applicant is determined to have qualified for coverage.

Underwriting Process Steps

Underwriting involves selection, classification, and rating of risks, informed by applicant information against insurer standards and guidelines.

Waiving of Answers

If a policy is issued despite unanswered application questions, the insurer waives the right to those answers and cannot deny claims based on them later.

Buyer's Guide

A buyer's guide is a basic consumer publication that simplifies the understanding of life insurance for applicants, aiding in their decision-making without addressing specific policies.

Premium Receipt Issuance

Agents are responsible for issuing a premium receipt when collecting the initial premium to confirm the transaction's validity.

Policy Coverage Effective Date

If a life insurance application includes full premium payment and the policy is issued as requested, coverage is effective from the application date.

Underwriting Department's Focus

Risk classification reviews focus on the applicant's medical history, physical condition, occupation, and habits, but not on past income.

Conditional Receipt after Application

When an applicant with a conditional receipt dies before policy issuance but is later found insurable, the insurance company must issue the policy and pay the beneficiary.

Preferred Risk Classification Benefits

Applicants classified as preferred risks enjoy lower premiums compared to standard risks due to superior health and lifestyle factors.

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Description

Test your knowledge on life insurance concepts with this sample quiz covering key terms and definitions. Understand the basics of risk transfer and the fundamentals of insurance contracts. Perfect for those preparing for the Florida life insurance exam.