Life Insurance Underwriting Flashcards
Tendency of a disproportionate number of people of poor risk to seek or buy insurance or maintain existing insurance in force
Adverse Selection
Date halfway between birthdays when the applicants age changes to the next higher age.
Age Change
Person completing the application to the insurance company for the insurance policy
Applicant
Statement of Information given when a person applies for life, health, or disability insurance. Underwriters use the information as a basis in deterring whether the application qualifies for acceptance under the company’s guidelines
Application
Used when the application or medical examiners report reveals conditions or situations, past or present, about which more information is desired.
Attending Physician Statement (APS)
Practice of making the effective date of a policy earlier than the application date. Used to make the insurers age lower than the applicants real age in order to get a lower premium. Limit to 6 months
Backdating
Type of receipt given by an insurance company upon the completion of an insurance application if the initial premium is collected with the application. Insurance becomes effective on the receipt date and continues for a specified period of time or until the insurer declines the application.
Binding Receipt (Unconditional Receipt)
Pamphlet that describes and compares various forms of life or health insurance. Give the consumer information to help them make an informed decision when purchasing insurance coverage.
Buyers Guide
Form customarily required to be signed by the agent and given to the prospective owner at the time a new application is completed. Without a valid conditional receipt of, no coverage is in force until the policy is issued, delivered, and accepted with the initial premium paid
Conditional Reciept
Detailed background investigation that may include an interview with coworkers, friends, and neighbors about an applicants character, reputation, lifestyle, etc.
Consumer Report (Investigative Consumer Report)
Summary of an insurance applicants credit history made by an independent organization that has investigated the applicants credit standing
Credit Report
Individual whose application for coverage was rejected by an insurance company
Declined Risk
Comparison form required by various state regulatory agencies to be given to every policy owner when replacing an existing policy with another
Disclosure Form
Statement or proof of a person’s health history and current health status that qualifies that person for coverage
Evidence of Insurability
Federal law passed in 1970 that provides an insurer with the right to receive additional information with regards to applicants for insurance coverage. Law allows the insurer to conduct a consumer report on applicants and proposed insureds.
Fair Credit Reporting Act of 1970
Agent or producer completing the applicants application for insurance
Field Underwriter
Is at least a 10 day period in a life insurance contract where the policy owner can decide to return the contract to the insurer without a valid reason and receive the full premium refunded.
Free-look Period
Report that contains general information regarding the health, habits, finances, and reputation of an applicant.
Inspection Report
Described the financial or emotional relationship between two or more parties justifying one owning a life insurance policy on the others. People have unlimited insurable interest in their own life. Must exist at the time of policy creating
Insurance Interest
Service organization that collects medical data on life and health insurance applicants for member insurance companies
Medical Information Bureau (MIB)
Summarizes the basic terms of an insurance policy, including conditions, coverage limitations, and premiums.
Policy Summary
Summarizes the basic terms of an insurance policy, including conditions, coverage limitations, and premiums.
Policy Summary
An applicant that represents the likelihood of risk lower than that of the standard applicant, typically due to better than average physical condition, occupation, mode of living, and other characteristics compared to other applicants of the same age
Preferred Risk
Person whose life is requesting to be insured
Proposed Insured
Policy with an additional charge to the standard premium because the person insured is classified as a higher-than-average risk. Results from impaired health or hazardous occupation
Rated Policy (Rating Up)
Legal activity where a producer convinces a prospect client to lapse or surrender a life or health policy and purchase a new one. Producers must provide a “Notice Regarding Replacement” to the consumer when this activity may occur.
Replacement
Statements made on the application are considered representations and not warranties. It may only need to be substantially accurate to the best of the applicants knowledge. Only considered to be fraudulent to a situation that would be material to the risk and the applicant made with fraudulent intent.
Representations
Underwriting category into which risk is placed depending upon the applicants susceptibility to injury. Illness, or death.
Risk Classification
Describes an applicant who cannot qualify for a standard policy, but may secure one with a rider waiving the payment for loss involving certain existing health impairments. May be required to pay a high premium or to accept a policy of a type other than the one for which they applied.
Special Class
Describes an applicant who cannot qualify for a standard policy, but may secure one with a rider waiving the payment for loss involving certain existing health impairments. May be required to pay a high premium or to accept a policy of a type other than the one for which they applied.
Special Class
Describes a person who is considered an average risk and insurance at standard rates.
Standard Risk
Describes an applicant whose physical condition does not meet the usual minimum standards. If due to adverse health. The application may be declined or written with a rate-up premium.
Substandard Risk (Impaired Risk)
Person who identifies, examines, and classifies the degree of risk represented by a proposed insured in order to determine whether or not coverage should be provided and, if so, at what rate.
Underwriter
Analysis of information obtained from various sources pertaining to an applicant for insurance and the determination of whether or not the insurance should be issued as requested. Offered at a higher premium, or declined
Underwriting
Information provided must be absolute and literally true. A breach may be sufficient to void the policy whether or not the warranty is material and whether or not the such breach had contributed to the loss
Warranty
