2024 | The Application Process & Initial Premium Responsibilities. • The Insurance School

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Question 1 of 8

1. Question
David was injured in an accident and submitted a claim. His insurer believes the other party involved in the incident is responsible for David’s injuries and the cost of his care. Which of the following statements best pertains to this situation?
- If David’s insurer rejects his claim, he’ll be forced to hire an attorney and sue the other parties involved if he wants to recuperate his losses.
- In a dispute over liability, insurers will typically utilize the entire payment of claims period to sue the negligent party for David’s cost of care
- Since David’s injuries were covered, he’ll likely use the Subrogation Rights in the policy to give his insurer the ability to sue the legally liable person for cost of his care
- Insurers are liable for all eligible claims. The decision to sue the liable person for the cost of care is a matter for David’s personal injury attorney, not his insurer.
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Question 2 of 8

2. Question
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Question 3 of 8

3. Question
Kelli completed her healthcare application and submitted her initial premium. Unfortunately, she was deemed a substandard risk and her application was rejected. While her application was in underwriting, she filed a claim which the insurer paid. Which of the following best identifies why the insurer paid Kelli’s claim?
- Kelli applied for a Medical Expense policy. Federal law prohibits insurers from imposing exclusions and limitations onto applicants. The underwriting process simply helps the insurer determine premium amounts, not insurability.
- Kelli was issued a Binding Receipt which provides applicants temporary coverage until the insurer formally rejects the application.
- Applicants have temporary coverage for accidents until their insurer formally rejects application.
- Kelli was issued an insurability receipt which provides applicants temporary coverage until the insurer formally rejects the application.
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Question 4 of 8

4. Question
Obi-Wan completed his healthcare application, submitted his initial premium, and received an Insurability Receipt. If he were to submit a claim before the insurer approves his application, would his claim be paid?
- Since Obvi-Wan was issued an Insurability Receipt, his insurer will pay claims submitted during underwriting if he proves to be insurable. If Obi-Wan is deemed uninsurable, his claim would not be paid.
- If Obi-Wan was issued an insurability receipt, the insurer will not provide coverage until they formally accept his application in writing as applied for.
- Insurability Receipts guarantee applicants coverage until their application is formally rejected by the insurer.
- With Insurability Receipts, applicants do not have coverage until the application is accepted by the insurer. Obi-Wan’s claims would not be paid until his application is accepted as applied for.
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Question 5 of 8

5. Question
Lucy applied for coverage with a foreign insurer. She submitted a completed application with an initial premium. The agent provided Lucy with a receipt for her initial premium payment then, submitted the application to the insurer for underwriting. The insurer accepted her application and issued the policy. While her policy was in the underwriting phase, Lucy went to her local clinic and received care for the flu. She submitted the claim with proof of loss however, despite being a covered service, her claim was denied.
- Insurance policies do not go in force until the insurer formally accepts the application.
- Lucy probably made a material misrepresentation on the application.
- Sicknesses are subject to a 10-day probationary period so, her visit to the clinic must have been within this timeframe.
- When Lucy applied for coverage, she was issued an Approval Receipt which does not provide her with benefits until the underwriters have deemed her insurable.
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Question 6 of 8

6. Question
Insurers mainly issue conditional premium receipts which require applicants to meet certain conditions before coverage goes into effect. Which type of premium receipt provides applicants with temporary coverage during the underwriting process even if they’re deemed uninsurable and the insurer formally rejects the application?
- Absolute receipts provide applicants who pay the initial premium with immediate coverage which remains in place until the application is rejected by the insurer.
- Binding premium receipts are considered temporary insurance agreements because, they provide immediate coverage during the underwriting phase. Coverage remains in place until the application is formally rejected by the insurer.
- Insurability receipts are issued to applicants who have had no major health insurance claims within the past 36-months. These temporary coverage receipts remain in force until the insurer formally rejects the application.
- Approval receipts are issued by Insurer Authorized Field Underwriters. They provide applicants with immediate coverage based on the outcome of their in-person interview. The policy remains in force until formally rejected by the insurer.
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Question 7 of 8

7. Question
Which of the following entities is a nonprofit established to aid in the underwriting process?
- Office of Insurance Regulations
- Division of Rehabilitation & Liquidation
- Medical Information Bureau
- National Association of Insurance Commissioners
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Question 8 of 8

8. Question
The insurance application is one of the most important sources of underwriting. Part-III of the application is often called the Agent’s Report. What type of information is contained in the Agent’s Report?
- Part-III of the insurance application identifies basic applicant information such as name, address, and phone number.
- The Agent’s Report contains the agents determination of the applicants personal and family medical history.
- The Agent Report contains the field underwriters’ observations about the applicant.
- Part-III contains the MIB Report and Preferred Risk Recommendations.
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2023 2-14 LIFE Law & Ethics Course

2024 | The Application Process & Initial Premium Responsibilities.

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