Chapter 02 Flashcards
Accident - Accidental Results
Requires only that the injury be unintended and unforeseen
Accident - Accidental Means
Requires both the injury and the cause of the injury to be unintended and unforeseen
Accidental Injury
A spontaneous event, unforeseen and unintended, resulting in injury
Coinsurance
The cost sharing between the insurer and the insured stated as a percentage of the claim amount, payable after the deductible has been met
Copayment
Predetermined dollar amount that applies per claim in addition to any other cost-sharing
Deductible
The initial amount payable by the insured before insurance benefits apply
Morbidity Table
Mathematical probability of a loss due to a sickness or injury.
Sickness
An illness or disease that is contracted after the probationary period has ended
Subrogation
Insurance co. covers your loss and the legal right of recovery is transferred from you to the insurer. So you can no longer go after the 3rd party
Transfers an insured’s legal right of recovery to the insurer that has paid a claim. This
prevents the insured from collecting twice for the same loss and holds the responsible
3rd party accountable for the loss
Disability Income (Loss of Time or Income)
Income received due to injury or sickness if an insured is unable to perform the duties of their job. To pay living expenses, not medical expenses.
The benefit is either a percentage of the insured’s past earnings or a flat dollar amount.
Long-Term Care Expense
Coverage for personal care services in a
setting other than an acute care unit of a hospital, such as a nursing home or even one’s own home.
Not in a hospital
Accidental Death and Dismemberment: Principal Sum
Accidental death, loss of two eyes, loss of two limbs cover 100% of the face amount
Accidental Death and Dismemberment: Capital Sum
Accidental loss of one eye or one limb, 50% of face sum.
Home Health Care
Limited nursing services, home health aide, light housekeeping, and related expenses may be available in both medical expense insurance and long-term care insurance.
Group Policies
Lower premiums; Employer sponsored and underwritten for the group. Employer makes all coverage decisions with mandatory coverages in place
ERISA
Federal act that governs group plans
Solicitation and Marketing Requirements
Must be very specific and accurate. Use companies pre-made advertising.
Limited Benifits
Covers a specific type of coverage, such as cancer or heart treatments.
Errors and Omissions
Professional liability insurance covering the liability of an agent.
Negligence, inadequacy, failing to obtain proper type or amount of coverage for a client.
Who must sign an application?
Both the owner, or applicant, the insured, and the producer must be present and sign the application.
Guardian must sign if minor is applicant
Field Underwriting
Producer gathers information for from applicant for application.
What is the application?
The application is the primary source of information for an insurer underwriting a potential risk. If attached to the policy, a copy of the application becomes part of the entire contract.
What is required in order to change info on an application?
applicant must initial the change, or the producer can complete a new application.
Consequences of Incomplete Applications
producer’s responsibility to make certain the application is filled out completely, correctly,
and to the best of the applicant’s knowledge.
The underwriter will most likely return an incomplete application to the producer for completion by
the applicant.
If a policy is issued based on an incomplete application, it is assumed the information
is not material to the issuance and the insurer waives the right to challenge a claim based on the
incomplete application.
Conditional Receipt is given when and does what?
- If a premium is paid at the time of application
- Provides coverage effective back to the date of
application as long as coverage is issued as applied, standard or better. - If a loss occurs before the policy is issued, the insurer would have to prove the policy would not have been issued as applied
When does a Policy Begin With no Initial Premium?
Must sign statement of good health
If a producer does not collect the
initial premium and submits ONLY the application to the insurer, the policy will not go into effect
until the application has been approved, the policy has been issued, and the premium has been paid.
HIPAA
- protect sensitive patient health information from being disclosed with the patient’s consent
or knowledge. - Insurers are required to maintain strict confidentiality of personal information obtained through
testing and must have written consent of the applicant before testing for HIV. - Insurance companies may refuse to issue a policy to individuals based on positive HIV test
results.
Underwriting Factors
■ Age ■ Gender ■ Tobacco use ■ Occupation and hobbies (degree of risk); if more than 1 occupation, the most hazardous will be used ■ Physical condition ■ Moral hazard/financial hazard ■ Health history ■ Geographic location ■ Foreign travel/residence ■ Other insurance ■ Plan applied for
Underwriting Information Sources: Part I and II
General and Medical
Underwriting Information Sources: Medical Examination
conducted by a medical professional regarding the applicant’s present
health. This is usually requested by the insurer after determining if the amount of coverage, age
of applicant or health history warrant the examination.
Underwriting Information Sources: Attending Physician Statement
Used in cases in which the individual application and/or medical reports reveal conditions of
which more information is required. This statement is completed by the applicant’s personal
physician treating a specific condition. An applicant must sign a written release to enable a
release of the APS.
Underwriting Information Sources: Medical Information Bureau
- primary purpose is to collect adverse medical information about an applicant’s health
(supported by insurance companies) and act as an information exchange. - may help lower the cost of
life and health insurance for consumers. - cannot solely be used to decline an applicant for insurance.
Underwriting Information Sources: Inspection Report
aka Consumer Investigative Report
* A general report of the applicant’s finances, character, morals, work, hobbies, and other habits. Interviewing people applicant knows
* The applicant must be made aware of any information gathering
and has rights provided under the FCRA.
Agent’s Report
personal statement submitted by the producer to the insurer regarding any personal knowledge
of the applicant, including information observed during the application process. This information
remains confidential between the producer and the insurer, and it does not become part of the
entire contract.
Factors in Premium Determination
Morbidity - Interest = (Net Premium) + Expenses = Gross Premium
Substandard Risk:
Issued Rated-up: Higher premiums
are required due to the greater potential for a larger number of claims (this may be
referred to as a surcharge).
Issued with Exclusions/Limitations – May be temporary or permanent; limits the
insurer’s obligation to pay. The rider used to exclude coverage for existing conditions
is sometimes referred to as an Impairment Rider.
Replacement of Policy
old policy should not be canceled before the new policy
is issued, otherwise this could leave the applicant without coverage.
The new policy may require
underwriting to prove evidence of insurability, which can affect the coverage and premiums of
the new policy.
