Chapter 7 Flashcards
What is Adverse Selection?
Adverse Selection represents the tendency of a disproportionate number of poor risks to seek or buy insurance or to maintain existing insurance in force. Sound underwriting reduces adverse selection.
What is Age Change?
Age Change is the date halfway between birthdays when the applicant’s age changes to the next higher age. Some insurers base age on the applicant’s nearest birthday, while others use the last birthday.
Who is the Applicant?
The applicant is the person completing an application with an insurance company for an insurance policy. The applicant is often the proposed insured, but this is not always the case.
What is an Application?
The application is the statement of information given when a person applies for life, health, or disability insurance. It is used by the underwriter to determine acceptance under the company’s guidelines.
What is an Attending Physician Statement (APS)?
An APS is used when the application or medical examiner’s report reveals conditions about which more information is desired. The applicant must sign an authorization for the physician to release information.
What is Backdating?
Backdating is the practice of making the effective date of a policy earlier than the application date to obtain a lower premium. State laws typically limit backdating to six months.
What is a Binding Receipt (Unconditional Receipt)?
A Binding Receipt is given by an insurance company upon completion of an application if the initial premium is collected. Insurance becomes effective on the receipt date for a specified period.
What is a Buyer’s Guide?
A Buyer’s Guide is a pamphlet that describes and compares various forms of life or health insurance. It must be provided to consumers when soliciting insurance.
What is a Conditional Receipt?
A Conditional Receipt is a form signed by the agent and given to the prospective owner at the time of application. It grants limited coverage under special conditions before issuing the policy.
What is a Consumer Report (Investigative Consumer Report)?
A Consumer Report is a detailed background investigation that may include interviews about an applicant’s character and lifestyle. Insurers can conduct this report as long as privacy is not invaded.
What is a Credit Report?
A Credit Report is a summary of an applicant’s credit history completed by an independent organization. It is typically obtained from one of the three major credit bureaus.
What is a Declined Risk?
A Declined Risk describes an individual whose application for coverage was rejected by an insurance company.
What is a Disclosure Form?
A Disclosure Form is a comparison form that must be given to every policy owner who chooses to replace an existing policy with another, as required by state regulatory agencies.
What is Evidence of Insurability?
Evidence of Insurability describes a statement or proof of a person’s health history and current health status which qualifies that person for coverage.
What is the Fair Credit Reporting Act?
The Fair Credit Reporting Act is a federal law that allows insurers to receive additional information regarding applicants for insurance coverage and conduct consumer reports.
