Ch 5 Post-Issue Policy Changes Flashcards
contractual right
various optional riders elected or purchased at time of application permit post issue changes typically w/o UW evidence
ex. GPO increase
non-contractual right
changes made after issue that typically require some form of UW evidence, not legally obligated to provide
ex. face amount increases/tobacco to non-tobacco/ risk reclassifications
Amount at risk change
-will change increase or decrease amount at risk
- if decrease, less EOI
- if increase, more EOI
- distinguish between change in face amount & in net amount at risk. can have increase in face but decline in actual net amount at risk ex. switching from increasing db to level db
insurability
non-contractual, any change in insurability & evidence needed to evaluate must be considered
-adverse and positive changes considered
tools to determine: MIB/nonmedical health questionnaire/Paramed/blood/urine/Rx check/APS
Anti-selection
adverse impact upon insurers that occurs when insureds select insurance coverage for only those risks that are likely to generate losses
-can be accompanied by intent to withhold pertinent information
Impact of post issue changes on customer/producer/company depend on?
-can impact relationship
-demographics of market insurer targets
-type of producer relationship (captive vs broker)
-business structure of insurer (stock vs mutual)
-company philosophy
Impact of UW
-UW makes final decision of whether to accept risk, in what amount, and at what rate
-UW responsible for changes, signs off on decisions
-UW handling/decisions impact policyholders and perception of company, keep policy in force, do addl business, share experiences
-UW impact on bottom-line performance of company by placing business on books, which derives profit or loss
-UW considers bigger picture that includes impact on customer, risk to company
contestability period
life insurance policies have 2-yr contestability period, during which validity of contract can be contested by insurer for material misrepresentation
material mispresentation
statements made that are false, which, had the truth been disclosed, would have resulted in a less favorable risk class than was issued
new contestable period
if policy change occurs after 2 yr contestable period, new contestable period can start w/ respect to new transaction
ex. increase in coverage, addition of spousal rider
conversions
most terms include provisions permitting conversion to permanent product w/o evidence if requested w/in time frame
-underwriting necessary IF increase to face amount when converting, change of risk class, conversion to survivor life or second-to-die policy
re-entries/ renewals
renewals w/o evidence if guaranteed
-evidence for those looking for more favorable premium
1035 Exchange
IRS allows you to exchange an insurance policy that you own for a new life insurance policy insuring the same person w/o paying tax on the investment gains earned on original contract
Reinstatements
process by which a life insurance company puts back in force a policy that has been terminated
-usually w/in 2-3 yrs
-addl evidence at discretion of UW, depends on:
- facultatively reinsured
- face amount
- current policy values
- age of PI
- duration policy had been in force
- duration it had been lapsed
- prior lapses/reinstatements of same policy
- disclosed health hx on reinstatement app
-contestable period begins anew, only w/ respect to misstatements on reinstatement app
DB increases
motivations for requesting: marriage, birth of child, new home purchase
handle like new business
