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ALU 202 (Personal Deck) > Chapter 5 > Flashcards

Chapter 5 Flashcards

1
Q

What are some universal key concepts to keep in mind when considering post-issue policy changes

A
  1. contractural vs. non-contractual policy provisions
  2. change in amount at risk
  3. insurability
  4. anti-selection
  5. customer/producer company.
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2
Q

Do typical optional riders that can be purchased at time of application which can permit port-issue changes go through underwriting?

A

yes, they are ususally excisied without underwriting evidence.

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3
Q

What are some examples of post-issue changes that are non-contrictural that a life incusrance company will do, but are not legally required to provide?

A

Face amount increases, SM changes and reconsideration of rating.

  • typically require u/w
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4
Q

Are there uniformity of opinions among US based copanies to where these policy changes are or are not permissible

A

no.

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5
Q

What is the difference between a change in face amount and amount at risk.

A

Change in faceb amount may not results in a change of risk. Ie contractural rights to convert term to perm. Since the amount of risk is less, there is little to no u/w typically required.

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6
Q

How is insurabiliuty a key element in the consideration of policy changes?

A

Less concerns with change in age over changes in health.

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7
Q

What is anti-selection?

A

the adverse impact upon insurers that occurs when insureds select insurance coverage for only those risks that are likely to generate losses.

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8
Q

Why would customer/producer/company impact relation vary amount insureres?

A
  1. demographics of the market the insurer may target
  2. type of producer relationship
  3. business structure of the insuere
  4. company philosophy
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9
Q

How is the underwriters impact on policy-changes important?

A
  1. underwriters deside the requirements
  2. they make the deicsion and reflect the business
  3. u/w and producer relationship can be affected.
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10
Q

What two important factors sould be considrred by the company when there is a policy change request?

A
  1. with the exception of policy increases or adding a rider benefit, most post-issue policy changes will not result in additional premium income to the insuere and can even result in lesser premiums as when rating reductions are allowed.
  2. for non-contractural policy changes, philosophies can differ from one insurer to another as to just how accomodating they should or should not be.
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11
Q

What is a contestability period?

A

with few exceptions, life insurance policies have a two-year contestability period, during which the validity of the policy contract can be contested by the insuere for material misrepresentations.

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12
Q

What are material misrepresentations?

A

statements made that are false which, has the truth been disclosed, would have resulted in a less favourable risk class than was issued. The underwriter has the nurden of adequately investigating issues or questions that can arise during the underwriting process so that an appropritate risk classification can be made and so that nothing that should have been investigated during u/w is lt to be done when a claim is filed.

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13
Q

how are contestability periods affected with policy changes

A
  1. new applications can shed light to hx that was not previously disclosed.
  2. if the policy change occurs after the two-year contestable preriod, a new contestable period can start with respect to the current transaction.
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14
Q

What would be the reinsurance implications on policy changes?

A
  1. for business that is fully retained there is no reinsurance concers
  2. if there is shared risk, consideration to RI must be given.
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15
Q

What is a reinsurace lead?

A

if there is more than one reinsurer often one of the participating pool reinsurers have been designated as the lead to streamline, the deicsion making process.

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16
Q

What are typical requirements on post-issue policy change requests?

A

there is none.

likely should resemble NB requirements for same faceamounts.

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17
Q

What are conversion rights?

A

typically most term policies have included a provision permitting converions to perm products without evidence. If the request is wihtin a certain time frame.
- usually if there is non change in the risk (no increase risk request) there is usually no evidence

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18
Q

Besides an request for an increase in risk, what other senerio would you see that can warrant evidence of insurability on a conversion?

A

when converting from an individual term policy to a survivor life or second-to-die policy.

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19
Q

What are “re-entries”

A

are term insurance policies that have reached the end of their period of specifed coverage and are being considered for renewable term.
- premium relfects the now older age of the insurerd, and the fact there is no current u/w.

20
Q

How do insurance companies handle re-entry policies?

A

typically permit the insurerd to provide current evidence of insurability in order to qualify for more favourable premium.

21
Q

What do you call a renewal that can be completed without evidence?

A

a guaranteed renewable term.

22
Q

What is 1035 internal exchanges? ie what does the internal revenue service allow you to do in the U.S.?

A

exchange an insurance policy that you own for a new life insurance policy insuring the same person wihtout paying tax on the investment gains earned on the OG contract.
This is governed by 1035 of the internal revenue Code,

23
Q

What are one of the requirements of the 1035 internal exchanges tax provisions?

A

no gain or loss shall be recognized on the exhange of a contract of life insurance for another contract of life insurance.

24
Q

what is the insured’s and producers perspecctive of the 1035 exchange policy laws?

A

the company is already at risk for the life insurered under a 1035 exchange policy , if the new coverage will be the same amount as the policy being replaced due to the requirements of a 1035 exachange, they can believe there should be little or no need for evidence

25
Q

What is a company’s perspective on the 1035 exchange?

A

there are severeal increased risks, despite the
no change in faceamount.
1. new policy= new COIs will reflect full u/w risk assessment without actually being reviewed.
2. new premium needed to carry the policy can be less than the premium on the existing policy despite the now older age.
3. if the health has changed, in the interim, the exchange can present a greater risk.

26
Q

Do internal exchanges require the same evidence as NB

A

yes
but know ordering this evidence is expensive, and can damage the relationship with the client. u.w typically will review an application then determine require evidence to keep cost low

27
Q

What is a reinstatement?

A

the process by which a life insurance company puts back in force a life insruance policy that has either 1) been terminated because of nonpayment of renewable permiums, or 2) has been continued under the extended term or reduced paid-up insurance non-forfeiture option.

28
Q

How do the laws differ between canada and the united states in terms of reinstatements?

A
  1. in the US between different states the minimum period of time during which an insere must offer the prospect of reinstatement to the policy holder are between 2-3 years. the insurers can provide a longer period that is required by law.
29
Q

How does one complete a reinstatement?

A
  1. complete application
  2. additional evidence is at the discretion of teh u.w unless RI.
  3. Contestability period will begin anew, although only with respect to misstatements that have been made in the reinstatement application
30
Q

What are some requirements to consider with reinstatements?

A
  1. whether or now policy was FAC shopped by RI
  2. policy face amount
  3. current policy values
  4. age of the proposed insurerd.
  5. duration the policy has been inforce
  6. duration it lapsed
  7. whether or now there have been prior lapses and reinstatements of this same policy
  8. disclsoed health hx on the reapplication.
31
Q

How are death benefit increase requests handled?

A

typically handled just like NB

32
Q

What are some examples of additional plan benefits or riders?

A 
annual renewable term riders
annual renewable and convertible term riders
childrens term riders
disability income riders
waiver of premium riders
33
Q

What are the typical evidence requirements on additional riders?

A

depending on type.
riders providing a death benefit for another life will require evidence based on that individuals age and amount of coverage. \
CTB- may only require a simple non-med
waiver of premiums s/t nonmedical and more

34
Q

What kind of risk do you need to assess when u/w premium waiver to TDB?

A

one of morbidity not mortality.

May need to review things such as chronic pain. Not a mortality but a morbidity issue.

35
Q

What are some difference between companies in regards to SM changes.

A
  1. definition of term Smoker
  2. lenght of abstenence.
  3. use/time frame
  4. preferred calsses.
36
Q

What are some examples of smoker change requests?

A
  1. non-tobacco changes on juvenile policies,
  2. changes on life policys
  3. changes on second-to-die policies.
37
Q

How are juvenile policies structured in terms of SM rates>

A

usually issued blended then at 18, they can have the option to qualify for non-tobacco rates. - if done promply evidence is minimum.
- the insuere provider must provided notice.

38
Q

How do individual life policies handle smoker changes?

A

choice of evidence differes.

- minimum if statement of tobacco use, MIB and urine. some require more evidence.

39
Q

How does changes in health affect SM status changes?

A

insurers are not required to lower premiums, therefore if health is worse typically the request to change SM status is decline.

There could be some companies that approve a change even though the health risk has increased, unless the change is related to SM such as CAD, TIA or PVD, or resp disorder.

40
Q

How are SM changes on Second-to-die policies handled?

A
  1. the focus of the dicussion is about both of the lives not just one. If the one life is now NS with no other adverse health but the other is highly rated, the insurance company is not obligated to change the premiums.
41
Q

How are standard to preferred risk class change request handled?

A
  1. ask if the more favourable class was available at the time the policy was issued- such request for risk change may not be offered on certain policies as prices do not reflect calculations of preferred classes.
  2. Should evidence be required.
42
Q

What is typically required for a reconsideration of rating (medical substandard reductions)

A

usually a policy change application
MIB search
APS/MED

if improvement of health is evidence then there may be a risk reduction approval. Review FAC shop if needed, and the contestability period starts again.

43
Q

What would you consider to be a non-medical substandard reduction?

A

cases that were rated for occupaiton, aviation, avocation, and foreign travel/residency.
- usually less medical requirements.
May consider a policy change application, MIB auth, and report, current aviation or avocation or travel questionnaire.

44
Q

What would you consider when looking at a review of aviation risk when the option to consider is either remove the flat extra or replace with exclusion rider?

A
  1. language used in aviation exclusion and whether or not it might unintentionally excluse the risk of being a passenger only
  2. do they still hold a valid pilots licencse
  3. did they sell their plane?
  4. how long its been since they last piloted a plane?
45
Q

What are two types of post-issue policy changes that can be exercised at the discretion of the policyowner, and that hx have not been required u/w?

A

the ownership and beneficiary changes.

-typically dont require u/w, unless a “stranger or investor-owned life insurance application) known as STOLI, SOLI and IOLI.

46
Q

What are some red flags when reviewing ownership and beneficiary changes.

A
  1. completed within short time frame after issue and placement date. Specially on older age insueres and $$$.

ALU 202 (Personal Deck) (15 decks)

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