Chapter 13

Question 1

What is claims administration?

Answer 1

the process of evaluating each claim submitted, deciding whther or not the claim is eligigl,e informing the individual who submitted the claim of the deicsion and authorizing the payment of each eligible claim according to the term of the policy.

Question 2

Which area of the company is usually reasponsible for evaluating and paying life insurance claims?

Answer 2

claims department, or claims administrative department.

Question 3

What is an underwriters role in the claims evaluation process for contestible claims?

Answer 3

to review the original file information and compare it to newly developed information, looking for any potential matrial misrepresentation or fraud.

Question 4

What is the purpose of the legal department in the claims evaluation process for contestible claims?

Answer 4

legal advise, if claim is denied, and denial is later disputed, their hob is to represent the compnay or supervise outside attorneys in any litigations, arbutrations, or settlement invoving the company.
- aids in development of policy forms, agency conttacts, business contracts, and any other legal documentations.

Question 5

What is the misstatement of age/gender provision?

Answer 5

a contractural provision found in most life insurance policies.
-these factors are sig in premium amounts. This statement describes what actions will be taken to adjust the amount of the policy benefit when age/sex was incorrectly stated.

Question 6

what is an incontestability provision?

Question 7

What is the stated period under which the insurer has the right to avoid the contract and deny the claim?

Answer 7

contestable period, and is usually 2 yrs.

Question 8

What is the suicide exlusion?

Answer 8

1. usually part of the basic policy (not a rider_
   - purpose to protect company angainst anti-selection when a proposed insured applied for the policy with suicide in mind.
   - 2 yrs
   - if a policy lapses, and is reinstated, the period is usually still original policy issue date. Canada will restart the epioer.d.

Question 9

Does the insurance company return the premiums paid when a suicide occurs during the contestability period?

Answer 9

yes, because its conisdered to be an affirmation of the validity of the contract by applying the limited-benefit-for death-by-suicide provision.

Question 10

An application cannot be altered once it has been signed. Should an application contain information that needs to be modified, completed, or clarified, most insurers will use an amendment. Define this

Answer 10

a modification to the terms of a contract, it follows the laws to modify a contract in the state where the contract will be enforced. IT is a written document signed by one of both partities involved in the agreement.

Question 11

What is a change in health statement

Answer 11

required when a proposed insured needs to notify the insrer in writing if his health or any material information in the app changes before the policy is delivered.

Question 12

IF the insured does not notify the insuere of the material change prior to the policy being issued, there could be a deny in the claim. To do so the insuere would have to show 3 things. What are they

Answer 12

1. change in health directly affected the degree of rick for the case
2. the proposed insurered knew of the change in health
3. the changes in health statements was unambiguous

Question 13

What is Waiver

Answer 13

The act of intentionally or knowingly reliunquishing or abandoning a known right, claim or privilege, either expressed or implied.
- if an insuere fails to act upon information it had whne the case was u/w the they surrender the right/privilege to contest on that basis.

Question 14

There are several types of waivers in relation to insurance contracts. Name them.

Answer 14

1. Express waivers- oral or written, they are clear statements that a right is being given up.
2. implied waivers- created thorugh conduct of the waiving party and indivates that a right will not be enforced
3. waiver by silence- created when there is a duty to speak.

Question 15

What is estoppel?

Answer 15

an equity principale applied to life insruacen contract law. if by your actions, words or silence, another person has relied on or taken action that he would not have otherwise takem to his detriment, your defence is waived and you are prohibited (estopped) from later defending, denying, or rescinding your orignal course of action.

Question 16

What is the difference between waiver and estoppel?

Answer 16

waiver is the action, estoppel is the legal doctrine that disallows the company from pursuing a denial based on the previous action.

Question 17

What is the notification of death process?

Answer 17

begins with the insrer being notified of the loss, the claiment is the person who submits a life insurance policy claim to the insuracne company. The claimant can be the beneficiary, owner, or person acting on behalf.
They will out the claimantt’s statement.
the claim is assigned to a claim analyst/adjuster. The claims reviewes the claim,

Question 18

To determine coverage the claims analysis will take 4 steps. Name them

Answer 18

1. determine date coverage was issued
2. varify the coverage was in force whne the loss occured by checking the admin sxstehm to verify all payments.
3. are premiums paid up to date, and check grace perios, lapses status, reinstatement status
4. determine if the policy is contestable.

Question 19

What is the Waiver of premium (WP) rider

Answer 19

if the insured becomes totally disabled, the insuere will give up, or waive the right to collect premiums that become due while the insured is totally disabled.
- waiting period typically exist

Question 20

What is the Accidental death benefit (ADB)

Answer 20

supplemental rider which provides a death benefit in addition to basic death beenfit should the insured die as a results of an accident.
there are limitations

Question 21

What accelerated death benefit?

Answer 21

can be a seperate rider, or with some insurers is part of the basic policy.

• certain terms need to be met.
• policy proceeds are paid to the policy owner-insured and are later deducted from the basic policy death benefit.

Question 22

Who is typically the payee on a benefit?

Answer 22

the names beneficiary. typically: spouse, child, estate, trust, charity or other entity deemed to have an insurable interest in the life of the insured at the time of issue.

Question 23

What is a natural beneficiary?

Answer 23

a person such as spouse or children.

Question 24

What is a non-natural beneficiary?

Answer 24

trust, company, or estate.

Question 25

What is a contingent beneficiary?

Answer 25

the second beneficiary to receive the benefit should the beneficiary predecease the insured.

Question 26

What happens if the beneficiary is disqualified by law from receiving the proceeds?

Answer 26

The insurer would usually pay the contingent beneficiary.

- usually happens when the beneficiary brought on the death of the insured.

Question 27

What happens if the beneficiary cannot be located?

Answer 27

the insurer will follow the laws of the state or province where the beneficiary last resided.
- they will tehn deposit the proceeds wihtin the state to be held in trust
beneficiary will then have to petition the state for the proceeds.
- the state will hold the money in trust for a specific number of years, then the proceeds escheat to the state.

Question 28

What is the act of interpleader?

Answer 28

when a beneficiary cannot be determined, the insurance company can give the funds to the court for them to handle.
- $$$

Question 29

What are typically acceptable forms of proff of death?

Answer 29

death certificate, original or copy.

- most canadian insurers will aslo accept coroner’s or hospital certificate of death as proff.

Question 30

What happens when the body cannot be found?

Answer 30

the circumstances of the disappearance will generally dictate how the claim analysis will proceed.

1. if explainable dissaperance can be assumed dead.
2. if unexplainable dissapearance the insurer will not approve a claum until it receives sufficient proof of the insured;s death. Usually a number of years must pass before an individual can be legally presumed dead.

Question 31

Usually when an application is completed, and a initial payment is received, the producer give the applicant a receitp that typically includes a temporary insurance aggrement (TIA). What is this?

Answer 31

it provides temporary insurance on the proposed insured should a dealth occur before the policy is issued and declivered. Usually has the following conditions

1. coverage is temporary
2. when the coverage becomes effective
3. the conditions that must be met for the coverage to become effective
4. any limitations, such as the amount of coverage
5. when coverage will end.

Question 32

There are various basic types of premium receipts/temporary insurance agreements. Name the two

Answer 32

1. binding premium receipt

2. conditional premium receipts

Question 33

Define the binding premium receipt

Answer 33

provides temp coverage that becomes effective from the time of the applciation recived the receipt and generally remains in effect until the earliest of the 4 following occurances

1. insurer issues the application
2. the insurer declines the app
3. the insurer terminates/suspends the coverage under the receipt.
4. after a specific lenght of time, 45, 60 days.

Question 34

define the conditional premium receipt

Answer 34

specifies certain conditions that must be met beofre the temp insurance coverage is effective.

1. approval premium receipt- coveage becomes effective when the insurer approves the proposed insured as a STD or better and STD risk. if the insured died before they are approved there is no coverage. (rare)
2. insurability premium receitp- coverage under the condition that the insrer finds that the proposed insure was insurable as STD on certain date speciifc in the premium receitp. if the insured dies, the uu/w is conitnued.

Question 35

What do you call the untrue statement of fact on an application?

Answer 35

misrepresentation

- f it would affec the decision on the case then it is considered material misrepresentation.

Question 36

What are the characteristics of material misrepresentation?

Answer 36

Should the insurance company known about the facts it would have done 1 of the following

1. charged an increased premium for the added risk,
2. excluded coverage fro the added rick
3. reduced the amount of coverage
4. declined to issue a policy.

Question 37

Is material misrepresentation limited to the medical aspects of the policy?

Answer 37

no,

it can also be related to financial information, and occupations

Question 38

In most jurisdictions, In order to for an insurer to claim misrepresentation, and deny payment of proceeds, it must prove which 3 elements?

Answer 38

1. the applicant or proposed insured failed to disclose or misrepresent a fact
2. the fact was wihtin the person’s knowledge at the time of misrepresentation was made
3. the fact was material, or relevant to the insurer’s acceptance of risk.

Question 39

What are some examples of material misrepresentation?

Answer 39

1. health
2. occupation/avocation
3. traffic violations
4. other insurance applications denied, or rated in teh past.

Question 40

There can be barriers to a contest on the ground of material misrepresentation wihtin the contestable period. Give 4 exmaples

Answer 40

1. agents knowledge of the misrepresentation can be imputed to the insurer
2. insuere delays in acting on its knowledge of misrepresentation
3. the insurer failys to inquire about ambiguous answered provided on the application for insurance
4. the insurer does not provide the policy owner with a copy of the insurance application.

Question 41

What happens if there is a finding of material misrepresentation,?

Answer 41

the insurer would then decide whether or not to proceed with a rescision or reformation of the contract.

Question 42

What is contract rescision?

Answer 42

remedy provided by law to an insrer that discovers that is has issued a policy based on material misrepresentation.

• it is void from its inception
• insurer returns the premiums paid for the policy.
• IN canada repayment depends on the terms of the contract.

Question 43

When will claims analysis typically involve underwriting?

Answer 43

On cases that fall wihtin the contestable period.
if they u/w feels there is material misreprensentation that would have altered the decision he will specify the decision. The medical staff can also be requested to review the application.

Question 44

What is policy reformation?

Answer 44

the practice of making a change to the policy contract terms, or benefits, due to information previously unknown at the policy issue that has meaningfull impact to the policy.
- mistatement of age.

Question 45

Most states contain an exception to the incontestability provision that permits the insurer to contest a policy at any time if the application contained a fraudulent misrepresentation. define this

Answer 45

this is a misrepresentation that was made with the intent and results of inducing the other party into a contract.
- requires a lot of proff.

Question 46

What are Red Flags suspecting fraud and/or material misrepresentation?

Answer 46

1. requesting an amount of coverage less than the amount of coverage that would require the proposed insured to submit specific evidence
2. discrepencies betweenthe applicants signature on the application and on other documentations
3. answered to questions on the application appear altered
4. signs of speculation such as a proposed insureds requesting an unusually large amount of coverage based on his income or an amount that is inconsistent with the potential financial loss.

Question 47

What is claim fraud?

Answer 47

defined as an action by which a person intentionally uses false information in an unfair or unlawful attempt to collect benefits under an insurance policy.

Question 48

What happens with international claims?

Answer 48

can be hard to get death certificate/ valid certificate therefore for US citizen the US consular officer will usually issue a report of death on an american citizen abroad rather then a death certificate

Question 49

Once claim is deemed payable the claims adjuster calculates the amount of policy proceeds to which the beneficairy or payee, are entitled. The proceeds typically include what?

Answer 49

1. basic death benefit
2. any additions to the basic death benefit
3. any deductions to the basic death benefit.

Question 50

What are some typical additions to the basic death benfit calcualtions?

Answer 50

1. paid-up additional insurance
2. accidental death benefits.
3. excess premium paid in advance
4. policy dividends declared but not yet paid
5. interest on delayed claims payment
6. loan interests paid in advance

Question 51

What are some typical deductions from the basic death benefit?

Answer 51

1. premiums due but unpaid during the grace period
2. policy loans
3. interest on any policy loans
4. accerlerated death benefits that have been paid.

Question 52

The owner of a policy can choose settelment options as a payout.

Answer 52

1. interest options- the insurer invests the proceeds and periodically pays interrest on the proceeds
2. fixed-period options- proceeds are paid by the insurerd in euqal installements over time
3. fixed-amount otion- proceeds paid in euqal instalments at a stated amount
4. life income optoin- proceeds are paid over the payees lifetime in periodic instalments.

Question 53

are life insurance death benefit that are paid out in lump sun includeed as income to the recipient of the payout?

Question 54

What is escheat?

Answer 54

a common law doctrine by which the property of a person who dies without heirs is tranferred to the crown or state. It serves to ensure that property is not left in limbo without recognized ownership.
- if a beneficiary is not found the money is said to esheat to the applicable state or jurisdiction.