EXAMFX Underwriting and Policy Issue 3 — Questions and Answers
Question 1: Which of the following is NOT typically part of the field underwriting process performed by agents?
- Completing the application accurately
- Conducting the medical examination (Correct answer)
- Collecting the initial premium
- Obtaining the applicant's signature
Correct answer: Conducting the medical examination
Medical examinations are conducted by paramedical examiners or physicians, not by agents as part of field underwriting.
Question 2: When a life insurance policy is delivered to the insured, which condition must typically be met before it takes effect?
- The agent must witness the first premium payment
- The insured must be in good health at delivery and the first premium must be paid (Correct answer)
- The insured must complete a second medical exam
- The beneficiary must sign an acknowledgment
Correct answer: The insured must be in good health at delivery and the first premium must be paid
Policies not prepaid at application typically require the insured to be in good health at delivery and the first premium to be paid.
Question 3: What is a 'flat extra' premium in life insurance underwriting?
- An additional premium per $1,000 of coverage for a specified number of years (Correct answer)
- A flat percentage increase applied to all substandard risks
- A one-time fee paid at policy issuance
- A discount given to preferred risk applicants
Correct answer: An additional premium per $1,000 of coverage for a specified number of years
A flat extra is a fixed dollar amount added per $1,000 of coverage, often used for temporary hazards like a dangerous occupation.
Question 4: An MIB (Medical Information Bureau) report is used by underwriters primarily to:
- Verify the agent's license status
- Detect misrepresentation and non-disclosure on insurance applications (Correct answer)
- Calculate the correct premium for a given risk
- Determine the policy's cash value
Correct answer: Detect misrepresentation and non-disclosure on insurance applications
The MIB stores coded medical information reported by member insurers to help detect material misrepresentation in applications.
Question 5: Which of the following best describes a 'rated policy'?
- A policy issued to a preferred risk at a discounted premium
- A policy issued with a higher premium due to increased risk factors (Correct answer)
- A policy with a guaranteed issue regardless of health
- A policy issued through a group plan
Correct answer: A policy issued with a higher premium due to increased risk factors
A rated policy is issued to a substandard risk applicant at a higher premium to compensate for the greater mortality risk.
Question 6: What is the primary purpose of an inspection report in the underwriting process?
- To confirm the property's current market value
- To provide information about the applicant's character, finances, and lifestyle (Correct answer)
- To verify the agent's commission eligibility
- To document the physical inspection of insured property
Correct answer: To provide information about the applicant's character, finances, and lifestyle
An inspection report (consumer report) provides underwriters with background information on the applicant's habits, finances, and character.
Question 7: In life insurance, what does the term 'insurability' refer to?
- The maximum face amount an insurer will offer
- The applicant's eligibility to obtain coverage based on risk evaluation (Correct answer)
- The agent's authority to bind coverage
- The policy's surrender value
Correct answer: The applicant's eligibility to obtain coverage based on risk evaluation
Insurability is the determination that an applicant meets the insurer's standards for issuing a policy based on health, lifestyle, and other risk factors.
EXAMFX Underwriting and Policy Issue 3
Which of the following is NOT typically part of the field underwriting process performed by agents?