Arkansas Life Insurance Review Questions And Answers (GRADED A)

Insurance - ANSWER Transfers the risk of loss from an individual or business entity to an insurance company, which spreads the costs of unexpected losses to many individuals Agent/Producer - ANSWER A legal representative of an insurance company Insurance Policy - ANSWER A contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events What is underwriting? - ANSWER The risk selection and classification process and involves a careful analysis of many different factors to determine the acceptability of applicants for insurance. In other words, the process in which an insurance company determines whether or not a particular applicant is insurable, and if so , what premium to charge. What info is gathered in Parts 1 and 2 of the application? - ANSWER General Information about the applicant including name, age, etc. as well as the type of policy applied for, any existing policies and if the proposed insurance will replace them...and Medical Information about the applicant. If insurance is for more than $50,000, a medical exam by a paramed will usually be required. What is the purpose of the agent's report? - ANSWER Provides the agent's personal observations concerning the proposed insured...and while it does not become a part of the entire contract, it is a part of the application process. Who is required to sign an application for life insurance? - ANSWER Both the agent and the proposed insured (usually the applicant...if not, the policyowner must also sign). What does representation mean and how does it differ from a warranty? - ANSWER Representations are statements believed to be true to the best of one's knowledge (in this case, the answers the insured gives on the insurance application), but they are not guaranteed to be true like a warranty (usually given by the insurance company) upon which the validity of the insurance policy depends. When does an insurance policy go into effect? - ANSWER If premium was paid, the policy will generally go into effect as of the date of the application. If not, it will go into effect when the premium is collected. At what point does coverage begin when an agent issues a Conditional Receipt? - ANSWER A conditional receipt will be given with an effective date of the date of application or the date of the medical exam, whichever is later. What are the four steps a producer must follow when replacing an existing policy? - ANSWER 1. Present to the applicant a "Notice Regarding Replacement" that is signed by both the applicant and the producer, and a copy must be left with the applicant. 2. Obtain a list of all existing life insurance and/or annuity policies to be replaced including policy numbers and the names of all companies being replaced. 3. Leave the applicant with the original or a copy of written or printed communications used for presentation to the applicant. 4. Submit to the replacing insurance company, with the application, a copy of the replacement notice. In a life insurance policy, when must insurable interest exist? - ANSWER At the time of application What is an attending physician's statement and when is it required? - ANSWER A statement potentially required by the underwriter (during the underwriting process) from a medical practitioner who treated the applicant for a prior medical problem. How can an insurance company use the information it obtains from the MIB? - ANSWER