Life & Health Insurance Quiz and Flashcards

Questions and Answers

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?

Disclose commissions earned from the sale of the policy. (correct)

Explain the policy provisions, riders, & exclusions.

Explain the rating procedures if the policy is rated differently than applied for.

Collect any premium due.

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?

Erase the incorrect answer & record the correct answer. Signup and view all the answers

Which of the following would be considered a non-medical insurance application?

An application on which the medical information is completed by the applicant & the agent only. Signup and view all the answers

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

As of the application date. Signup and view all the answers

Upon policy delivery, what may the producer be required to obtain?

Signed waiver of premium. Signup and view all the answers

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?

Whether an insurable interest exists between the individuals. Signup and view all the answers

Which of the following is a risk classification used by underwriters for life insurance?

Standard Signup and view all the answers

What does the term 'illustration' in a life insurance policy refer to?

A presentation of non-guaranteed elements of a policy. Signup and view all the answers

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?

$2,500 Signup and view all the answers

What is the term for the fee a policy owner must pay to the insurance company to maintain coverage?

Premium Signup and view all the answers

What type of report includes the insured's financial status, hobbies, & habits?

Inspection Report Signup and view all the answers

All of the following information about the applicant is identified in the General Information section of a life insurance application except?

Education Signup and view all the answers

What is a generic consumer publication that explains life insurance in general terms?

Buyer's Guide Signup and view all the answers

All of the following are duties & responsibilities of producers at the time of application except?

Change any incorrect statement on the application by personally initialing next to the corrected statement. Signup and view all the answers

What describes the specific information about a policy?

Policy Summary Signup and view all the answers

What do individuals use to transfer their risk of loss to a larger group?

Insurance Signup and view all the answers

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?

It will likely be higher because the applicant is a substandard risk. Signup and view all the answers

What will happen if Y applied for insurance & was killed in an accident before the policy was issued?

The insurance company will issue the policy anyway & pay the face value to the beneficiary. Signup and view all the answers

What is the primary source of information used for insurance underwriting?

The Application Signup and view all the answers

If an applicant for a life insurance policy is found to be a substandard risk, what is the insurance company's most likely action?

Charge a higher premium. Signup and view all the answers

Why should the producer personally deliver the policy when the first premium has already been paid?

To help the insured understand all aspects of the contract. Signup and view all the answers

When will coverage begin if the applicant does not wish to give the agent the initial premium?

When the agent delivers the policy, collects the initial premium, & the applicant completes an acceptable Statement of Good Health. Signup and view all the answers

What report includes information regarding a person's credit, character, reputation, & habits?

Consumer Report Signup and view all the answers

If an insurer issued a policy based on an application that had unanswered questions, which of the following will be true?

The application will be interpreted as if the insurer waived its right to have an answer on the application. Signup and view all the answers

Which of the following information about the applicant is not included on Part 1 of the application for insurance?

Medical background Signup and view all the answers

What is the purpose of the buyer's guide?

To allow the consumer to compare the costs of different policies. Signup and view all the answers

Contracts that are prepared by one party & submitted to another party on a 'take it or leave it' basis are classified as:

Contracts of adhesion Signup and view all the answers

Who makes up the Medical Information Bureau?

Insurers Signup and view all the answers

When is the earliest a policy may go into effect?

When the application is signed & a check is given to the agent. Signup and view all the answers

What insurance principle has the insured violated if an insurer neglects to pay a legitimate claim covered under the terms of the policy?

Consideration Signup and view all the answers

Insurance is the transfer of?

Risk. Signup and view all the answers

What is a definition of a unilateral contract?

One-sided; only one party makes an enforceable promise. Signup and view all the answers

Which of the following policies would have an IRS required corridor or gap between the cash value & the death benefit?

Universal Life - Option A Signup and view all the answers

What would help prevent a universal life policy from lapsing?

Target premium Signup and view all the answers

During partial withdrawal from a universal life policy, which portion will be taxed?

Interest Signup and view all the answers

What type of annuity is it if the annuity income payments are scheduled to begin 2 years after the annuity was purchased?

Deferred Signup and view all the answers

Which Universal Life option has a gradually increasing cash value & a level death benefit?

Option A Signup and view all the answers

What age must the insured attain in order to receive the policy's face amount of a whole life policy?

100 Signup and view all the answers

What type of life insurance policy would be best suited for an individual who has borrowed $10,000 on a 5-year installment loan?

Decreasing term Signup and view all the answers

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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Description

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.

Life & Health 1 Flashcards