Questions and Answers
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will:
If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT:
Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives?
An applicant who receives a preferred risk classification qualifies for:
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The Federal Fair Credit Reporting Act:
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Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles?
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Which of the following would provide an underwriter with information concerning an applicant's health history?
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Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT:
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Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
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In forming an insurance contract, when does acceptance usually occur?
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Study Notes
Conditional Receipt and Policy Issuance
- A conditional receipt provides temporary coverage to the prospective insured from the application or medical examination date if they are insurable.
- If a prospective insured dies before the policy is issued, the insurer pays policy proceeds only if the policy would have been issued.
Application Changes by Agents
- Agents cannot erase or obliterate answers on an insurance application, preserving the integrity of the application.
- Acceptable methods for correcting an application include drawing a line through incorrect answers, writing the correct answers, and having the applicant initial the changes.
- Destroying the application and completing a new one is permissible if significant changes are needed.
Medical Information Section in Applications
- The Medical Information section includes the medical background of the applicant, current health status, medical visits, and causes of death for deceased relatives.
Preferred Risk Classification
- Individuals with a preferred risk classification benefit from lower premiums compared to standard risk individuals due to superior health conditions and lifestyles.
Federal Fair Credit Reporting Act
- This act regulates consumer reports and aims to protect consumer privacy while ensuring the integrity of information used in underwriting processes.
Standard Risk Classification
- Standard risk classifications represent the majority of individuals within a certain age group and similar lifestyles, often corresponding to average risk levels.
Medical Information Bureau (MIB)
- The MIB provides underwriters with detailed health history information about applicants, setting it apart from other reports like the inspection and agent's reports.
Elements of a Legal Contract in Insurance
- Essential elements of an insurance contract include consideration, legal purpose, and offer and acceptance, but conditions are not required elements specified by law.
Aleatory Contracts
- Insurance contracts are classified as aleatory, meaning the insured pays a small premium for a potentially large payout, creating a disparity in risk.
Acceptance of Insurance Contracts
- Acceptance of an insurance contract typically occurs when the insurer's underwriter approves coverage, rather than at the application submission or policy delivery stages.
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Description
This quiz focuses on the key concepts of insurance applications, underwriting processes, and policy delivery. Test your knowledge on how insurers handle conditional receipts and the implications for prospective insured individuals. Enhance your understanding of underwriting principles and insurance policies.
