Insurance Underwriting Fundamentals

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Questions and Answers

What is the purpose of a probationary period in insurance?

To assess the applicant's risk level before insurance starts (correct)

To limit coverage to new applicants

To determine the applicant's financial status

To allow time for policy cancellation

What term refers to prior medical conditions that were not disclosed at the time of application?

Exempt conditions

Disqualifying conditions

Conditional conditions

Pre-existing conditions (correct)

What must occur if there are unanswered questions on the insurance application?

The application is considered invalid

The insurer automatically rejects the application

The insurer assumes the applicant has no relevant information (correct)

The insurer requests further documentation

Who is required to sign the insurance application?

The applicant and the producer Signup and view all the answers

Before an insurer can share medical information, the applicant must be notified about all except:

The insurer has the right to share identifiable health information with the agent Signup and view all the answers

In underwriting, what is indicated if an applicant is issued a policy as a substandard risk?

The policy serves as a counteroffer from the insurer Signup and view all the answers

Under which law must an applicant be notified before an insurer orders a financial report?

Fair Credit Reporting Act Signup and view all the answers

What is considered the primary source of underwriting information for individual health insurance policies?

The application itself Signup and view all the answers

What type of insurer is formed under the laws of another country?

Alien insurer Signup and view all the answers

Which principle ensures an insured can be reimbursed up to the amount of their actual loss?

Indemnity Signup and view all the answers

What is required for a conditional contract to be enforceable?

Both parties must perform specified duties Signup and view all the answers

What type of organization is a fraternal benefit society?

Nonprofit corporation without capital stock Signup and view all the answers

What authority allows an insurer to operate within a certain state?

Certificate of Authority Signup and view all the answers

What defines material misrepresentation in insurance applications?

Issues affecting policy issuance Signup and view all the answers

Under the Fair Credit Reporting Act, what can someone do if they are denied coverage?

Request a copy of the report used Signup and view all the answers

What is the ownership structure of stock insurance companies?

Owned by stockholders Signup and view all the answers

What is the term used for the individual applying for insurance coverage and responsible for the application?

Policyowner Signup and view all the answers

Which document must consumers receive according to the Fair Credit Reporting Act?

Notice of Information Practices Signup and view all the answers

When underwriting a policy for an applicant with two jobs, which job is considered for underwriting?

The most hazardous of the two Signup and view all the answers

What is the period called that must pass before new coverage takes effect for a specific condition?

Probationary period Signup and view all the answers

What does the term 'usual, customary, and reasonable' refer to in insurance?

The average charge for medical services Signup and view all the answers

What should a producer do if the premium has not been collected?

Return the policy to the insurer for further underwriting Signup and view all the answers

What action should Producer W take upon noticing an unanswered question and an incorrect answer on the application?

Make arrangements to meet X in-person to obtain the missing information and correct the incorrect response Signup and view all the answers

What is the term for a specified period that must elapse before new coverage goes into effect for a given condition?

Probationary period Signup and view all the answers

What does it indicate if a policy is issued with a surcharge?

The policy was issued with a higher premium due to the increased risk Signup and view all the answers

Which of the following is not considered an underwriting factor for health insurance?

Spouse's occupation Signup and view all the answers

What type of receipt is issued if the premium is collected at the time of the application?

Conditional receipt Signup and view all the answers

Which signatures are required from Howard when buying a critical illness policy for his wife, naming his daughter as beneficiary?

Howard only Signup and view all the answers

Which source provides information to underwriters about an applicant's previous medical exam failures?

The MIB Signup and view all the answers

What must the producer obtain if the insurer issues a health insurance policy without an initial premium?

Signed Statement of Good Health Signup and view all the answers

In an insurance context, when a premium is not submitted with the application, what does the premium represent?

Acceptance Signup and view all the answers

Which two major categories of perils does Accident and Health Insurance cover?

Accidental injury and Sickness Signup and view all the answers

Which document is NOT included as part of the insurance contract under the entire contract clause?

The agent's report Signup and view all the answers

What are the statements made on an insurance application considered to be if they reflect the applicant's best knowledge?

Representations Signup and view all the answers

If a claim is made under a policy issued despite incomplete questions on the application, how is the claim treated?

Covered Signup and view all the answers

In a replacement sale, which of the following must consumers be made aware of?

All replacement policy benefits Signup and view all the answers

What is the correct statement regarding Edward's situation with his disability insurance application?

He will be denied coverage due to pre-existing conditions Signup and view all the answers

Which policy can X purchase to cover medical expenses before enrolling in Medicare?

Short-Term Medical Signup and view all the answers

What is coinsurance typically expressed as?

A percentage shared by both parties Signup and view all the answers

Which of the following is NOT a characteristic of traditional health insurance plans?

Immediate coverage from enrollment Signup and view all the answers

Which type of policy provides benefits specifically for injuries from certain events?

Limited Accident Policy Signup and view all the answers

Which injury type is typically covered under accident and health insurance policies?

Nonoccupational injuries Signup and view all the answers

What type of health plan structure does staying in-network under a POS plan result in?

HMO structure Signup and view all the answers

Which government health plan is specifically designed for military personnel?

Tricare Signup and view all the answers

What type of payments did Hank receive for his hospital stays?

Benefit payments from a Hospital Income Policy Signup and view all the answers

Study Notes

FL Health Agent 240 Study Notes

Insurance Organizations: An organization that transacts insurance only with its own members is a fraternal organization.
Regulatory Power: The commissioner, superintendent, or director has the power to issue rules and regulations to enforce insurance laws.
Legal Contract Elements: Representation is not an essential element of a legal contract.
Insurance Policy Issuers: Insurance companies manufacture and sell insurance coverage.
Contract Types: A unilateral contract is one where only one party is legally obligated after the premium is paid.
Policyholder: The insured is the person or entity covered by the insurance policy.
Fraternal Ownership: Fraternal insurance companies are owned by their members.
Insurance Regulators: Members of the National Association of Insurance Commissioners (NAIC) include state and territorial insurance commissioners.
Legislative Branch: The legislative branch writes and passes insurance laws, statutes, to protect the insuring public.
Insurance Regulation Authority: Individual states have the highest authority for insurance regulations.
Insurable Interest: Insurable interest for life insurance is required only at the time of the application.
Foreign Insurers: Insurers incorporated in another state but doing business in the current state are considered foreign.
Stock Insurance Ownership: Stock insurance companies are owned by stockholders.
Life Insurance and Insurable Interest: In life insurance, insurable interest in one's own life is unlimited.
Conditional Contract: A conditional contract requires both parties to perform specified duties for it to be enforceable.
Indemnity Principle: An insured can be reimbursed up to the amount of actual loss (indemnity).
Certificate of Authority: A Certificate of Authority grants an insurer the authority to operate in a specific state.
Representations: Applicant statements of belief regarding facts are called representations.
Misrepresentation vs. Material Misrepresentation: Material misrepresentations regarding facts affect the issuing of a policy, while a mere misrepresentation will not.
Fair Credit Reporting Act: Individuals denied coverage can request a copy of their report.
Mutual Insurance Company Dividends: Dividends from mutual insurance companies are non-taxable.
Policy Acceptance: Insurance coverage begins when an applicant receives and legally signs the policy, agreeing to the terms and conditions and paying the additional premium, if any, as mutually agreed.
Alien Insurer: An insurer formed under the laws of another country is an alien insurer.
State Regulation: Insurance is primarily regulated at the state level.
Executive Branch: The state's executive branch enforces existing statutes.
Fraternal Benefit Societies: A nonprofit corporation without capital stock, formed solely for members, is a fraternal benefit society.
Application Representations: A life insurance applicant's statements on their application are considered representations, not warranties.
Judicial Branch: The judicial branch interprets and determines the constitutionality of statutes.
Domicile: Domicile refers to the jurisdiction where an insurer was formed or incorporated.
Application Submission Timeline: Coverage begins the day an application is submitted.
Aleatory Contracts: Insurance contracts are aleatory contracts, with unequal exchanges of value.
Policy Issuance: An insurer is considered an admitted insurer once authorized to do business in the state.
Legal Authority: The NAIC (National Association of Insurance Commissioners) has no authority over insurance regulation.
Certificate Issuance: The state insurance commissioner or director issues a Certificate of Authority to enable insurers to do business in the state.
Warranties: Warranties are statements that must be guaranteed to be absolute truths.
Conditional Receipt: Coverage may become effective the date of the application, or date of the completed medical exam if required.
Health Insurance Policy Issuance: Coverage as applied for will likely occur as per the completed medical exam.
Underwriting Information: The application is the primary source of underwriting information.
Premium Collection: The agent collects the full premium amount at the time of delivery.
Policy Delivery: Legal delivery of a policy occurs when the policy is issued as applied for and the premium is fully collected.
Unanswered Questions: If questions on an insurance application are unanswered, the insurer is waiving the right to have those questions answered and the policy will proceed.
Applicant Notification: Applicant misrepresentation will be resolved.
Producer Role: Producers ensure the application is complete and accurate.
Medical Information Bureau (MIB): The MIB provides medical information.
Underwriting: Field Underwriting is the initial step in the process of insuring a health risk.
Specified Periods: Probationary period is the period when new coverage goes into effect.
Preexisting Conditions: Preexisting conditions must be disclosed on required forms.
Conditional Receipts: Conditional receipts are issued to indicate coverage begins at a specified time, such as the date of the application, medical exam, or policy issuance.
Statements of Good Health: A signed statement of good health is required if an initial premium is not paid at time of application.
Accidental Bodily Injury: A spontaneous, unforeseen, and unintended event resulting in injury.
Policyowner: The policyowner controls policy decisions and coverages.
Beneficiaries: Beneficiaries are individuals specifically named in the policy who receive benefits upon the insured's loss.
Insurer's Home Office: Ultimately, the insurer's home office underwriter determines an applicant's insurability.
Health Insurance Application Concerns: Inaccurate or missing information on the application necessitates corrective action.
Fair Credit Reporting Act (FCRA): Consumers must be notified about the use of applicant information under the FCRA (Fair Credit Reporting Act).
Policy Payment Methods: The premium may be payable at the time of application with a conditional receipt, or at the time of policy delivery.
Primary Care Physician: A Primary Care Physician (PCP) or Gatekeeper serves as the primary point of care for an insured person.
Health Insurance Claims: If a claim is denied due to inaccuracies, this is resolved.

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Description

Test your knowledge on key concepts in insurance underwriting, including the role of the probationary period, disclosure of medical conditions, and the responsibilities in an insurance application. This quiz covers essential principles and regulations that govern the underwriting process in health insurance.