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Individual life underwriting, pricing, and claims
Finish →Question 1 of 37
Who makes the decision to accept an individual life insurance application and assign its underwriting class?
Reveal answer
Correct answer: The insurer
The insurer evaluates the evidence and makes the underwriting decision.
Question 2 of 37
An applicant requests coverage far exceeding the income replacement need stated in the application. Which review most directly addresses that discrepancy?
Reveal answer
Correct answer: Financial underwriting of the amount requested
Financial underwriting assesses whether the amount requested fits a legitimate insurance need.
Question 3 of 37
Compared with a standard risk, a preferred life insurance risk generally has which characteristic?
Reveal answer
Correct answer: More favorable expected mortality
Preferred classification reflects more favorable expected mortality than standard classification.
Question 4 of 37
Holding benefits, interest assumptions, and expenses constant, higher expected mortality has what effect on the premium needed?
Reveal answer
Correct answer: It raises the premium needed.
Higher expected mortality increases expected death claims, raising the premium needed when other factors remain fixed.
Question 5 of 37
Which statement distinguishes a gross life insurance premium from a net premium?
Reveal answer
Correct answer: The gross premium includes expense loading.
Gross premium includes expense loading; net premium excludes that loading.
Question 6 of 37
Under 15 U.S.C. § 1681d(a), when must written disclosure that an investigative consumer report may be made be delivered?
Reveal answer
Correct answer: No later than three days after the report is first requested
The initial written disclosure is due no later than three days after the report is first requested.
Question 7 of 37
A California life insurer wants an applicant to take an HIV test. What consent must it obtain?
Reveal answer
Correct answer: The applicant's written informed consent for the test
California requires the applicant's written informed consent before insurer HIV testing.
Question 8 of 37
An admitted California life insurer pays covered lump-sum death proceeds 45 days after death. No statutory exception applies. From what date is interest computed under § 10172.5?
Reveal answer
Correct answer: The date of the insured's death
Once covered proceeds remain unpaid beyond thirty days, the required interest is computed from death.
Question 9 of 37
A life applicant's medical records support ordinary expected mortality, but the requested benefit lacks financial justification. What is the best conclusion?
Reveal answer
Correct answer: A satisfactory medical assessment does not resolve the financial underwriting concern.
Medical and financial underwriting answer different questions; acceptable mortality does not justify the requested amount.
Question 10 of 37
An industry information exchange entry conflicts with an applicant's medical answer. What should the underwriting process do next?
Reveal answer
Correct answer: Investigate and verify the discrepancy with appropriate evidence.
Exchange information is an investigative lead, not a substitute for verifying the applicant's facts.
Question 11 of 37
A California life insurer declines an application solely because of a positive HIV test. Which assessment is correct?
Reveal answer
Correct answer: The decline violates the prohibition on denial based solely on a positive HIV test.
California prohibits declining life coverage based solely on a positive HIV test, regardless of when or at whose direction it was performed.
Question 12 of 37
Which pricing assumption represents expected investment earnings in life insurance premium calculations?
Reveal answer
Correct answer: Interest
Interest assumptions reflect expected investment earnings.
Question 13 of 37
An annual premium is $1,200, while the monthly payment is $105. What does comparison of these payment modes show?
Reveal answer
Correct answer: Monthly payments total $1,260, or $60 more per year.
Twelve payments of $105 total $1,260, which exceeds $1,200 by $60.
Question 14 of 37
A claim has a $200,000 death benefit, a $12,000 outstanding policy loan, and $600 accrued loan interest. With no other adjustments, what proceeds are payable?
Reveal answer
Correct answer: $187,400
Subtract both loan principal and accrued interest: $200,000 − $12,000 − $600 = $187,400.
Question 15 of 37
A California claim form offers a lump sum and additional settlement options. Which treatment matches § 10170(f)?
Reveal answer
Correct answer: The beneficiary may choose among the offered options, which must be clearly described.
California requires clear description of settlement alternatives and beneficiary choice when additional options are offered.
Question 16 of 37
A California beneficiary elects in writing, delivered to the insurer, to receive death proceeds through a non-lump-sum settlement. What follows under § 10172.5(d)?
Reveal answer
Correct answer: That section does not require interest for this settlement election.
The statute expressly excepts a beneficiary's written election delivered to the insurer for payment by means other than a lump sum.
Question 17 of 37
A premium model increases its assumed investment interest while leaving mortality, expenses, and benefits unchanged. What is the expected effect?
Reveal answer
Correct answer: A lower premium is needed.
Higher assumed investment earnings reduce the premium needed to fund the same benefits, other factors constant.
Question 18 of 37
A producer finds an unanswered medical question while reviewing an application. Which action best fits the producer's information-gathering role?
Reveal answer
Correct answer: Obtain the applicant's complete, accurate answer before submission.
The producer gathers complete and accurate application information; the insurer evaluates it.
Question 19 of 37
An insurer has already requested an investigative consumer report when it receives a timely written request for the investigation's nature and scope. Under federal law, disclosure is due no later than when?
Reveal answer
Correct answer: Five days after the consumer's request is received
The deadline is five days after receipt of the consumer's request or first request for the report, whichever is later. Here the consumer request is later.
Question 20 of 37
A California life insurer uses applicants' ZIP Codes to determine who must undergo HIV testing. How should this practice be evaluated?
Reveal answer
Correct answer: It uses a prohibited criterion for deciding who must be tested.
California expressly prohibits using ZIP Codes or other territorial classifications within the state to determine whether to require HIV testing.
Question 21 of 37
Which fact is central to death claim administration rather than the original premium calculation?
Reveal answer
Correct answer: Whether the claimant is entitled to receive the proceeds
Claim administration verifies the proper recipient; mortality, interest, and expenses are pricing inputs.
Question 22 of 37
A life insurer accepts an applicant whose expected mortality is less favorable than its standard class and charges an additional premium. Which treatment does this illustrate?
Reveal answer
Correct answer: Substandard classification
Acceptance at a higher premium for less favorable mortality illustrates substandard treatment.
Question 23 of 37
A California insurer has everything needed to transmit a death benefit on day 12 but plans to wait until day 30 merely because interest has not yet been triggered. Which conclusion is correct?
Reveal answer
Correct answer: The interest threshold does not permit withholding payment longer than reasonably necessary.
Section 10172.5(b) does not allow withholding payment longer than reasonably necessary to transmit it.
Question 24 of 37
Before a California life insurer pays a claim, its home office receives written notice of another person's claim to the proceeds. What is the effect under § 10172?
Reveal answer
Correct answer: The statutory full-discharge protection is subject to the exception for this prior written notice.
The full-discharge rule has an exception for written notice of another claim received at the home office before payment.
Question 25 of 37
Which basis can support different treatment of an HIV-positive applicant under California § 799.02(b), assuming the section applies?
Reveal answer
Correct answer: Sound actuarial principles and actual or reasonably anticipated experience
The statute permits specified underwriting distinctions when based on sound actuarial principles and actual or reasonably anticipated experience.
Question 26 of 37
For otherwise identical benefits and pricing assumptions, one group has higher expected mortality while another has higher assumed investment earnings. Which comparison is correct?
Reveal answer
Correct answer: Higher mortality pushes the premium upward; higher assumed earnings push it downward.
Mortality increases expected benefit cost; investment earnings help fund that cost.
Question 27 of 37
A California death benefit is payable and the policy has a valid written assignment. No competing written claim has reached the insurer's home office. Which payment is addressed by § 10172's discharge rule?
Reveal answer
Correct answer: Payment in accordance with the written assignment
Section 10172 recognizes payment according to a written assignment when the policy has been assigned.
Question 28 of 37
A California life insurer obtains informed consent and keeps HIV results confidential, but selects applicants for testing based on perceived sexual orientation. Which conclusion best evaluates the process?
Reveal answer
Correct answer: The selection criterion is prohibited despite the other safeguards.
California prohibits actual or perceived sexual orientation as an HIV testing criterion; consent and confidentiality do not cure that violation.
Question 29 of 37
An investigative consumer report disclosure tells an applicant a report may be made but omits rights information. Which addition is required under 15 U.S.C. § 1681d(a)(1)?
Reveal answer
Correct answer: Notice of the right to request further disclosure and the written summary of consumer rights
The initial notice must include the right to request subsection (b) disclosure and the required written summary of consumer rights.
Question 30 of 37
Which pricing component covers costs such as administering policies and acquiring new business?
Reveal answer
Correct answer: Expenses
Expenses include administration and acquisition costs supported through premium loading.
Question 31 of 37
A California claim form offers settlement choices, including a retained-asset account as the default if no choice is made. What disclosure is required for that default under § 10170(f)?
Reveal answer
Correct answer: A prominent disclosure in the selection portion of the claim form that no choice will result in a retained-asset account
A retained-asset account default requires prominent disclosure of that consequence in the claim form's settlement-selection portion.
Question 32 of 37
An insurer tells a life applicant it cannot make an offer now but will reconsider after a pending medical evaluation is completed in six months. Which underwriting outcome does this describe?
Reveal answer
Correct answer: Postponement pending further medical information
Deferring an offer until later medical information becomes available describes postponement.
Question 33 of 37
A California applicant is willing to sign HIV-test consent but has not received the required educational material and counseling resource list. What should the insurer do before obtaining the signature?
Reveal answer
Correct answer: Provide the materials on paper or electronically, as the applicant chooses.
California requires the educational material and counseling resources before consent is signed, in the applicant's chosen paper or electronic format.
Question 34 of 37
Two otherwise comparable life quotes differ because one uses a less favorable mortality class and the other adds a monthly payment charge. Which analysis is best?
Reveal answer
Correct answer: One difference reflects underwriting risk; the other reflects payment frequency.
A mortality class affects risk pricing; a monthly charge reflects the premium payment arrangement.
Question 35 of 37
A California insurer says that banning declines based solely on a positive HIV test requires it to offer every HIV-positive applicant standard rates. Which response is most accurate?
Reveal answer
Correct answer: Incorrect; the statute permits specified distinctions supported by sound actuarial principles and actual or reasonably anticipated experience.
The prohibition on sole-result denial does not eliminate actuarially supported underwriting under § 799.02(b).
Question 36 of 37
An applicant meets the insurer's preferred mortality standards. The producer concludes that both financial review and claim entitlement review are therefore unnecessary. Which assessment is best?
Reveal answer
Correct answer: Preferred status resolves neither financial justification nor the later claimant's entitlement.
Mortality classification does not establish financial need or the proper recipient at claim time.
Question 37 of 37
An admitted California insurer pays covered lump-sum death proceeds on day 50 and calculates interest only for days after day 30. No exception applies. Which correction is needed?
Reveal answer
Correct answer: Compute the required interest from death, because the thirty-day threshold was exceeded.
California's threshold triggers an interest calculation from the date of death, not merely for the period after thirty days.
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