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Questions and Answers
What is the purpose of a conditional receipt?
What is the purpose of a conditional receipt?
It is intended to provide coverage on a date earlier than the date of the issuance of the policy.
A producer agent must do all of the following except?
A producer agent must do all of the following except?
What could happen if an agent sells insurance to an applicant who appears confused?
What could happen if an agent sells insurance to an applicant who appears confused?
The policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application.
If a change needs to be made to the application for insurance, the agent may do all of the following except?
If a change needs to be made to the application for insurance, the agent may do all of the following except?
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Which of the following would be considered a non-medical insurance application?
Which of the following would be considered a non-medical insurance application?
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When does the policy coverage become effective if the full premium was submitted with the application for life insurance?
When does the policy coverage become effective if the full premium was submitted with the application for life insurance?
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Upon policy delivery, what may the producer be required to obtain?
Upon policy delivery, what may the producer be required to obtain?
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What would the underwriter be concerned about if an applicant for a life insurance policy and the person to be insured are two different people?
What would the underwriter be concerned about if an applicant for a life insurance policy and the person to be insured are two different people?
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Which of the following is a risk classification used by underwriters for life insurance?
Which of the following is a risk classification used by underwriters for life insurance?
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What does the term 'illustration' in a life insurance policy refer to?
What does the term 'illustration' in a life insurance policy refer to?
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What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
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What is the term for the fee a policy owner must pay to the insurance company to maintain coverage?
What is the term for the fee a policy owner must pay to the insurance company to maintain coverage?
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What type of report includes the insured's financial status, hobbies, & habits?
What type of report includes the insured's financial status, hobbies, & habits?
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All of the following information about the applicant is identified in the General Information section of a life insurance application except?
All of the following information about the applicant is identified in the General Information section of a life insurance application except?
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What is a generic consumer publication that explains life insurance in general terms?
What is a generic consumer publication that explains life insurance in general terms?
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All of the following are duties & responsibilities of producers at the time of application except?
All of the following are duties & responsibilities of producers at the time of application except?
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What describes the specific information about a policy?
What describes the specific information about a policy?
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What do individuals use to transfer their risk of loss to a larger group?
What do individuals use to transfer their risk of loss to a larger group?
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In the underwriting process, if an applicant for life insurance is in poor health & has some dangerous habits, which of the following is true concerning the policy premium?
In the underwriting process, if an applicant for life insurance is in poor health & has some dangerous habits, which of the following is true concerning the policy premium?
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What will happen if Y applied for insurance & was killed in an accident before the policy was issued?
What will happen if Y applied for insurance & was killed in an accident before the policy was issued?
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What is the primary source of information used for insurance underwriting?
What is the primary source of information used for insurance underwriting?
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If an applicant for a life insurance policy is found to be a substandard risk, what is the insurance company's most likely action?
If an applicant for a life insurance policy is found to be a substandard risk, what is the insurance company's most likely action?
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Why should the producer personally deliver the policy when the first premium has already been paid?
Why should the producer personally deliver the policy when the first premium has already been paid?
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When will coverage begin if the applicant does not wish to give the agent the initial premium?
When will coverage begin if the applicant does not wish to give the agent the initial premium?
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What report includes information regarding a person's credit, character, reputation, & habits?
What report includes information regarding a person's credit, character, reputation, & habits?
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If an insurer issued a policy based on an application that had unanswered questions, which of the following will be true?
If an insurer issued a policy based on an application that had unanswered questions, which of the following will be true?
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Which of the following information about the applicant is not included on Part 1 of the application for insurance?
Which of the following information about the applicant is not included on Part 1 of the application for insurance?
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What is the purpose of the buyer's guide?
What is the purpose of the buyer's guide?
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Contracts that are prepared by one party & submitted to another party on a 'take it or leave it' basis are classified as:
Contracts that are prepared by one party & submitted to another party on a 'take it or leave it' basis are classified as:
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Who makes up the Medical Information Bureau?
Who makes up the Medical Information Bureau?
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When is the earliest a policy may go into effect?
When is the earliest a policy may go into effect?
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What insurance principle has the insured violated if an insurer neglects to pay a legitimate claim covered under the terms of the policy?
What insurance principle has the insured violated if an insurer neglects to pay a legitimate claim covered under the terms of the policy?
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Insurance is the transfer of?
Insurance is the transfer of?
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What is a definition of a unilateral contract?
What is a definition of a unilateral contract?
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Which of the following policies would have an IRS required corridor or gap between the cash value & the death benefit?
Which of the following policies would have an IRS required corridor or gap between the cash value & the death benefit?
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What would help prevent a universal life policy from lapsing?
What would help prevent a universal life policy from lapsing?
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During partial withdrawal from a universal life policy, which portion will be taxed?
During partial withdrawal from a universal life policy, which portion will be taxed?
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What type of annuity is it if the annuity income payments are scheduled to begin 2 years after the annuity was purchased?
What type of annuity is it if the annuity income payments are scheduled to begin 2 years after the annuity was purchased?
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Which Universal Life option has a gradually increasing cash value & a level death benefit?
Which Universal Life option has a gradually increasing cash value & a level death benefit?
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What age must the insured attain in order to receive the policy's face amount of a whole life policy?
What age must the insured attain in order to receive the policy's face amount of a whole life policy?
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What type of life insurance policy would be best suited for an individual who has borrowed $10,000 on a 5-year installment loan?
What type of life insurance policy would be best suited for an individual who has borrowed $10,000 on a 5-year installment loan?
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Study Notes
Conditional Receipts
- A conditional receipt provides coverage from the application date, even before policy issuance.
Responsibilities of Producer Agents
- Agents must explain policy details, collect premium payments, and clarify rating procedures, but not disclose commissions.
Policy Validity Concerns
- Policies can be voided if applicants were incapacitated due to medication during the application process.
Application Corrections
- Agents may not erase information directly; changes must be noted or require a new application.
Non-Medical Applications
- A non-medical insurance application is when medical information is provided solely by the applicant and agent.
Coverage Activation
- Insurance coverage becomes effective from the application date if the full premium is submitted.
Policy Delivery Requirements
- Upon delivering a policy, agents may need to collect premium and provide a delivery receipt but not a signed waiver of premium.
Insurable Interest
- Underwriters assess whether an insurable interest exists between applicants and insured individuals.
Risk Classifications
- 'Standard' is a common risk classification among other classifications like poor and excellent.
Illustrations in Policies
- An "illustration" outlines non-guaranteed policy elements.
Fair Credit Reporting Act Penalty
- The maximum penalty for habitual willful noncompliance is $2,500.
Insurance Premium Definition
- A premium is the fee paid to insurance companies for maintaining coverage.
Inspection Report
- An inspection report evaluates an applicant's financial status, hobbies, and habits.
General Information Section
- Gender, occupation, and age are included in this section; education is not.
Buyer's Guide Purpose
- It serves as a generic resource to aid consumers in understanding life insurance options.
Producer Duties
- Producers are responsible for ensuring complete applications and clarifying receipts but not correcting applicant information directly.
Policy Summary
- A policy summary outlines specific information about an insurance policy.
Risk Transfer
- Insurance allows individuals to transfer their risk of loss to a larger group.
Substandard Risks
- Substandard risks lead to higher premiums due to health or behavior concerns.
Policy Delivery Importance
- Personal delivery of the policy helps ensure that the insured understands the contract.
Conditionally Issued Coverage
- Coverage may begin upon initial premium payment and signing of the application, based on the receipt conditions.
Consumer Report
- This report includes data concerning an individual's credit, character, and habits.
Missing Information Consequences
- Unanswered application questions may lead to the insurer waiving this right, not voiding the policy.
Part 1 Application Details
- Occupation, marital status, and gender are part of Part 1; medical background is excluded.
Buyer's Guide Function
- It facilitates the comparison of different insurance policy costs.
Adhesion Contracts
- Contracts of adhesion are prepared by one party and presented to another on a "take it or leave it" basis.
Medical Information Bureau
- Comprised of insurers who share information about applicants.
Effective Date of Policies
- A policy may take effect once the application is signed and payment is made.
Consideration Principle
- Failure to pay a legitimate claim indicates a violation of the principle of consideration.
Risk Definition
- Insurance is fundamentally the transfer of risk from individuals to insurers.
Unilateral Contracts
- These contracts are one-sided, with enforceable promises made by only one party.
IRS Corridor Requirement
- Universal Life - Option A requires maintaining an IRS-mandated corridor between cash value and death benefit.
Preventing Policy Lapse
- Paying the target premium helps avoid lapsing of universal life policies.
Taxation on Withdrawals
- During partial withdrawals from universal life policies, only the interest portion is taxable.
Deferred Annuities
- Annuities that begin payout years after purchase are classified as deferred.
Universal Life Options
- Option A features a gradually increasing cash value alongside a level death benefit.
Whole Life Policy Face Amount
- The insured must reach age 100 to collect the policy’s face amount.
Insurance for Loans
- Decreasing term life insurance is suitable for individuals with installment loans that decrease over time.
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Test your knowledge with these flashcards covering essential concepts in Life and Health insurance. Explore the importance of conditional receipts and the responsibilities of a producer agent. Perfect for students or professionals looking to reinforce their understanding.