Life & Health Insurance Ch. 2 Flashcards
Memorize
Policyowner
Purchaser of the life insurance policy but does not have to be the insured one
Death Benefit
Paid upon the death of the inusred
Third Party Ownership
Policy is owned by someone else
Ex. spouse or parent
When must producers provide the Buyer’s Guide and Policy Information
At the time of application
Notice of Information
Applicant must be notified and given written consent for info sent to a third party
HIPPA Privacy Rules
All individually identifiable health information must remain confidential
Policy Replacement
Any transaction in which a new life policy or annuity is to be purchased and the producer knows the contract will either:
Lapse, reduce, amended, or reissued
Conservation
Act of saving the current policy and preventing it from being replaced
Primary source of information
The application
Required signatures
Both the producer and applicant
Changes in application
Applicant must initial any changes
Incomplete application
Producers responsibility to make sure application is filled out
anything not filled out will be returned
Initial premium
Premium paid at the time of application
Conditional Receipt
Says when the coverage will begin
Longer of the 2
date of application or date of completion of and medical exams
Binding Receipt
Provides immediate coverage if premium is paid at time of application
Trial Application
application submitted without a premium
Trial Application is also called
Collect on Delivery (CoD)
Underwriting
Process of selection, classification, and rating
Determining if someone is insurable essentially
What is the purpose of underwriting?
To detect any adverse selections
6 Sources of Underwriting
Application
Medical Exams
Attending Physician’s Statement
Medical Information Bureau
Inspection Report
Agents Report
The Application
Underwriter confirms insurable interest exists
Part 1: General information
Part 2: Medical background/history
Medical/Physical Exam
Doctor conducts a check up at insurer’s expense
Attending Physician Statement (APS)
Used when an applicant or medical report reveal conditions that need more information
Medical Information Bureau (MIB)
Used to collect adverse medical information about an applicant’s health
Applicant cannot be declined because of this report
Inspection Report
General report of the applicant’s finances, moral, work, hobbies etc
Agent’s Report
Personal statement about the applicant from the producer
Underwriting Factors
Age, gender, job, physical condition, tobacco use, health history
Standard Risks
Normal human, average life expectancy
Preferred Risks
Individuals who qualify for a lower premium
Above average life expectancy
Substandard Risks
Individuals with poor health
What are substandard risks issued?
Rated policies or Surcharges
What can be the frequency of premium payments?
Monthly. quarterly, semi-annually, or annually
What is the cheapest way to pay?
Annually
What is the most expensive way to pay?
Monthly
Who’s responsibility to deliver the policy and collect premiums?
Producer
Legal Delivery or Constructive Delivery
Only happens when the premium was paid at the time of application
Substandard Contract
Insurer may “counteroffer” the applicant based off reports
Statement of Good Health
Used if premium isn’t paid at time of application
says the applicant remained in good health
Survivor Protection
Providing funds for surviving spouses and dependents
Estate Creation
Life insurance proceeds paid in one lump sum to create an immediate estate that the insurer can pass on
Estate Conservation
Provides money to pay any estate taxes or loans upon the death of the insured
Cash Accumulation
Amount of cash accessible to the policyholder
Liquidity
Immediate funds available upon death of the insured
