EXAMFX Underwriting and Policy Issue 2

Question 1

Which factor is considered a UNFAVORABLE underwriting factor for life insurance applicants?

Accepted Answer

Family history of hereditary disease

Answer

A family history of hereditary diseases increases mortality risk and is considered an unfavorable underwriting factor.

Question 2

What is the purpose of a reinsurance arrangement in underwriting?

Accepted Answer

To transfer a portion of risk to another insurer

Answer

Reinsurance allows an insurer to transfer part of its risk to another company, limiting exposure on large or high-risk policies.

Question 3

When an insurer issues a policy with a higher premium than applied for, this is called a:

Accepted Answer

Substandard rating

Answer

A substandard rating results in a higher premium charged to applicants who present greater-than-average risk.

Question 4

Which document serves as the insurer's formal acceptance of a life insurance application?

Accepted Answer

Issued policy

Answer

The issued policy represents the insurer's formal acceptance of the application and creates the insurance contract.

Question 5

What does a 'table rating' indicate about an insurance applicant?

Accepted Answer

The applicant poses a higher-than-standard risk requiring a premium surcharge

Answer

Table ratings (1-16 or A-P) indicate substandard risks and correspond to premium increases above the standard rate.

(EXAMFX) Exam FX Insurance Practice Test