Life Insurance Underwriting Process Quiz
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Questions and Answers

All are true statements regarding the underwriting process, EXCEPT:

  • The original application is a primary source of information used in the underwriting process
  • Signed consent from the applicant must be provided in order to test for AIDS and HIV virus
  • The cost of examination is paid for by the insurer
  • AIDS and HIV virus exams can be conducted in a discriminatory fashion (correct)

    • What actions should P take when 5 questions on a life application were not answered?

    Set up a meeting with the applicant to answer the remaining questions.

    Life insurance companies are required to establish and maintain an anti-money laundering compliance program according to which federal regulation?

    USA Patriot Act

    What is being delivered during a policy delivery?

    <p>Insurance contract to the proposed insured</p> Signup and view all the answers

    Which of these do NOT constitute policy delivery?

    <p>Policy issued with a rating</p> Signup and view all the answers

    Who is not required to sign a life insurance application?

    <p>Beneficiary</p> Signup and view all the answers

    What will the insurer likely issue if a pilot declines an additional premium modification?

    <p>Aviation exclusion</p> Signup and view all the answers

    What legal right has the insurer waived if they accept a life insurance application with unanswered questions?

    <p>Waived one of its legal rights</p> Signup and view all the answers

    When an insurance application is taken by a producer, which of these statements is true?

    <p>Any changes made on the application require the applicant's initials.</p> Signup and view all the answers

    When does a life insurance contract become effective if the initial premium is not collected during the application process?

    <p>When producer delivers policy and collects initial premium</p> Signup and view all the answers

    Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of:

    <p>$10,000</p> Signup and view all the answers

    What item is given to T if they are told by the producer that the insurer is bound to the coverage as of the date of application?

    <p>Conditional receipt</p> Signup and view all the answers

    When will coverage be effective if the check was never signed by the applicant?

    <p>The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured.</p> Signup and view all the answers

    Which term accurately defines an underwriter's assessment of information on a life insurance application?

    <p>Risk classification</p> Signup and view all the answers

    What actions should an agent take if a customer wants to apply for an insurance policy?

    <p>Complete the application and review the information with the customer prior to obtaining the customer's signature, then send the application off to the insurance company.</p> Signup and view all the answers

    What is necessary before a life policy is issued?

    <p>A signed application by the prospect.</p> Signup and view all the answers

    When did the coverage become effective in the case of an application submitted without an initial premium but approved manager?

    <p>January 26.</p> Signup and view all the answers

    Why is a signature required on a life insurance application?

    <p>To attest that the statements on the application are accurate to the best of the applicant's knowledge.</p> Signup and view all the answers

    Why must an insurance applicant answer all questions on the application?

    <p>Statements and representations on the application are part of the consideration for issuing a policy.</p> Signup and view all the answers

    What is the entity whose sole purpose is sharing medical data among its member companies called?

    <p>Medical Information Bureau</p> Signup and view all the answers

    In what year was the USA Patriot Act enacted?

    <p>2001</p> Signup and view all the answers

    What may be considered a red flag when cash surrendering a Universal Life insurance policy in its early years?

    <p>Anti-Money Laundering violation</p> Signup and view all the answers

    What might a medical information report (MIB) disclose?

    <p>Prior use of marijuana.</p> Signup and view all the answers

    What action should the producer take after D explains recent chest pain events to the producer?

    <p>Collect initial premium along with a signed health statement.</p> Signup and view all the answers

    When cash surrendering a recent whole life policy and requesting proceeds payable to an unrelated third party, which violation will likely be red-flagged?

    <p>Anti-money laundering rules.</p> Signup and view all the answers

    The underwriting process involves all of these, except for:

    <p>Policy loan</p> Signup and view all the answers

    At what time must a policy owner have insurable interest on the insured for the life policy to be valid?

    <p>At the time of application.</p> Signup and view all the answers

    All of these are considered sources of underwriting information about an applicant EXCEPT:

    <p>Rating service</p> Signup and view all the answers

    A(n) ________ contained in a life insurance policy states that the policy will not cover certain risks.

    <p>exclusion</p> Signup and view all the answers

    What is the purpose of the USA Patriot Act?

    <p>Detect and deter terrorism.</p> Signup and view all the answers

    At what point does a $20,000 life insurance policy application go into effect if the producer does not collect the initial premium?

    <p>When the applicant receives the policy and pays the initial premium.</p> Signup and view all the answers

    Which factors are taken into consideration when determining a premium rate for a whole life policy?

    <p>Risk classification.</p> Signup and view all the answers

    M completes an application for life insurance but does not pay the initial premium. All of these actions must occur before M's policy goes into effect EXCEPT:

    <p>Free-look period has expired</p> Signup and view all the answers

    What action should a producer take if the initial premium is not submitted with the application?

    <p>Forward the application to the insurer without the initial premium.</p> Signup and view all the answers

    Which factors do not play a role in the underwriting of a life insurance policy?

    <p>Marital status.</p> Signup and view all the answers

    What must the insurer advise the applicant according to the Fair Credit Reporting Act?

    <p>An investigative consumer report may be conducted.</p> Signup and view all the answers

    Which actions should a producer take when submitting an insurance application to an insurer?

    <p>Inform insurer of relevant information not included on the application.</p> Signup and view all the answers

    What kind of receipt was used when K is given a receipt stating that coverage begins immediately if the application is approved?

    <p>Conditional.</p> Signup and view all the answers

    What should an agent ensure regarding changes made on an insurance application?

    <p>The agent should have the applicant initial any changes made on the application.</p> Signup and view all the answers

    Which of these factors do not play a role in the underwriting of a life insurance policy?

    <p>Marital status</p> Signup and view all the answers

    What is the initial source of underwriting for an insurance policy?

    <p>Application containing statements from the insured.</p> Signup and view all the answers

    How will the insurer handle a policy returned within the free-look period?

    <p>Premium will be fully refunded.</p> Signup and view all the answers

    What must the producer obtain upon delivery of a rated life insurance policy?

    <p>A signed good health statement.</p> Signup and view all the answers

    What must D do if a mistake is made during the application process?

    <p>Correct the information and have the prospect initial the change.</p> Signup and view all the answers

    What can a student pilot pay regular premium cost for in her life insurance policy?

    <p>Aviation exclusion.</p> Signup and view all the answers

    What is a statement made by an insured on an insurance application that must be true to the best of one's knowledge called?

    <p>Representation.</p> Signup and view all the answers

    Which parts of a life insurance policy are guaranteed to be true?

    <p>Warranty.</p> Signup and view all the answers

    In order for coverage on a non-medical insurance application to take effect the same day, what must the producer collect?

    <p>The initial premium.</p> Signup and view all the answers

    Study Notes

    Underwriting Process

    • Signed consent from the applicant is required for testing for AIDS and HIV.
    • The cost of examinations is covered by the insurer.
    • The original application serves as the primary source of information for underwriting.
    • Discriminatory practices cannot be applied when conducting AIDS and HIV exams.

    Actions of Producers

    • Producers must meet with applicants if life application questions are unanswered.
    • Any changes to applications require the applicant's initials for validation.

    Life Insurance Regulations

    • The USA Patriot Act mandates life insurance companies maintain an anti-money laundering compliance program.
    • Insurers must report cash payments exceeding $10,000 under this act.

    Policy Delivery

    • Insurance contracts are delivered to the proposed insured.
    • A policy issued with a rating does not count as delivery.
    • Coverage becomes effective only when the initial premium is paid during policy delivery.

    Application Requirements

    • A beneficiary is not required to sign a life insurance application.
    • An applicant must have insurable interest at the time of the application.
    • All application questions must be answered, as they are vital for issuing the policy.

    Conditional Receipts

    • Conditions specified in a receipt must be satisfied for the policy to take effect.
    • A conditional receipt indicates coverage begins immediately if the application is approved.

    Health and Risk Assessment

    • Underwriters utilize risk classification to evaluate applications.
    • Factors such as personal health history can lead to adjustments, like extra premiums or exclusions.

    Anti-Money Laundering Indicators

    • Cash surrenders of Universal Life insurance policies may raise red flags.
    • Transactions involving unrelated third parties can also trigger scrutiny under anti-money laundering rules.

    Medical Information Bureau (MIB)

    • MIB facilitates the sharing of medical data among member insurance companies.
    • Information on prior substance use, such as marijuana, can be disclosed in MIB reports.

    Fair Credit Reporting Act

    • This law governs the use of consumer reports in determining insurance premium rates and underwriting decisions.
    • Insurers must notify applicants when investigative consumer reports are conducted.

    Application Processing and Coverage

    • Applications submitted without initial premiums can still be forwarded to insurers.
    • Life insurance coverage becomes effective upon policy delivery and initial premium collection.

    Miscellaneous

    • Backdating a policy allows applicants to secure a lower premium rate.
    • A signed good health statement is required if the initial premium is not collected with the application.
    • All crucial policy details are summarized in a policy summary for the insured's reference.

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    Description

    Test your knowledge on the underwriting process in life insurance, including regulations, producer actions, policy delivery, and application requirements. This quiz covers essential aspects such as consent for testing, cost coverage, and compliance mandates.

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