Underwriting and Policy Issue Flashcards
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Read the first 7 Underwriting and Policy Issue flashcards as text
Which of the following is an example of a 'moral hazard' that an underwriter must consider?
Answer: An applicant who has a history of filing fraudulent claims
A moral hazard relates to the character or honesty of the applicant, such as a history of fraud or dishonest behavior.
What is a 'conditional receipt' and when does coverage begin under it?
Answer: Coverage begins on the application date if the applicant is found to be insurable as applied for
A conditional receipt provides coverage from the application date, but only if the applicant would have been approved as applied for at standard or better rates.
How does the 'Law of Large Numbers' benefit insurance underwriting?
Answer: It enables more accurate prediction of losses when a large number of similar risks are pooled
The Law of Large Numbers states that as the number of similar exposure units increases, loss predictions become more statistically reliable.
A 'waiver of premium rider' is most commonly added to a policy based on which underwriting consideration?
Answer: The insured's desire to protect premium payments in case of total disability
A waiver of premium rider waives future premiums if the insured becomes totally disabled, protecting the policy from lapsing.
Which of the following statements about 'guaranteed issue' life insurance is TRUE?
Answer: It is issued without underwriting and is available to all applicants within an eligible group
Guaranteed issue policies require no medical underwriting and must be issued to all eligible applicants, though they typically come with lower face amounts and higher premiums.
What action should an agent take if an applicant's health status changes between application and policy delivery?
Answer: Withhold the policy and notify the insurer of the change in health
If the applicant's health deteriorates between application and delivery, the agent must not deliver the policy and must notify the insurer so underwriting can be reconsidered.
Which of the following describes the 'numerical rating system' used in life insurance underwriting?
Answer: A method assigning numerical debits and credits to risk factors to determine overall insurability
The numerical rating system assigns point values to risk factors (debits for negatives, credits for positives) to calculate an overall risk score for underwriting decisions.