Life Insurance Underwriting and Policy Issue Flashcards
adverse selection
tendency of a disproportionate number of poor risks to seek or buy insurance or maintain existing insurance in force; sound underwriting reduces this
age change
the date halfway between birthdays when the applicant’s age changes to the next higher age. Based upon the age of his last birthday
applicant
the person completing the application to the insurance company for insurance policy; most of the time is the insured, but not always
application
statement of information given when a person applies for life, health or disability insurance. The insurance company’s underwriter uses this info as a basis in determining whether the applicant qualifies for acceptance; are attached to and made a part of ALL individual contracts
attending physician statements (APS)
used when the application or medical examiner’s report reveals conditions about which more information is desired; must get application’s signature on release of info for underwriter
backdating
making the effective date of a policy earlier than the application date. This is used to make issue age lower than applicant’s real age in order to lower premiums. —-state laws limit this to 6 months
binding receipt (unconditional receipt)
receipt given by the insurance company upon application completion if the initial premium is collected with application.
-insurance becomes effective on receipt date and continues until period of time or if application is denied
buyer’s guide
pamphlet that describes and compares various forms of life or health insurance. MUST be provided to consumer upon soliciting insurance
conditional receipt
required to be signed by the agent and given to the owner at the time a new application is complete; the issue of this receipt is subject to company rules; without this receipt, no coverage is in force until the policy is issued, delivered, and accepted with the initial premium paid
consumer report
detailed background investigation that may include an interview with coworkers, friends, and neighbors about an applicant’s character, reputation, lifestyle, ect. Consumers can conduct this as long as no invasion of privacy is present. common type is a credit report
credit report
summary of an applicant’s credit history
declined risk
individual whose application for coverage was rejected by the insurance company
disclosure form
comparison form required by various state regulatory agencies to be given to every policyowner when replacing an existing policy with another
evidence of insurability
describes a statement or proof of a person’s health history and current health status that qualifies that person for coverage
Fair Credit Report Act
passed in 1970 (federal law) that provides an insurer with the right to receive additional information with regard to applicants for insurance coverage. applicants must be informed of the purpose of the report.
field underwriter
agent or producer completing the applicant’s application for insurance
free-look period
at least 10 days; begins when the producer delivers the insurance policy. if policy owner decides to return the contract, they will receive full premium refund;
inspection report
report that contains general info regarding the health, habits, finances, and reputation of an applicant. developed by a firm that specializes in this type of service
insurable interest
describes the financial or emotional relationship between 2+ parties justifying owning a life insurance policy on the other. it must exist at the time of policy issue
Medical Information Bureau
organization that collects medical data on life and health insurance applicants for member insurance companies
policy summary
summarizes the basic terms of a policy, including conditions, coverage limitations, and premiums.
preferred risk
an applicant who 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
proposed insured
the person whose life is requesting to be insured. typically is the applicant, but not always
rated policy (rated up)
the basis for an additional charge to the standard premium because the person insured is classified as a higher than average risk. usually result from impaired health or hazardous occupation
replacement
legal activity where a producer convinces a prospective client to lapse or surrender a policy and purchase a new one. must produce a “notice regarding replacement” to consumer. must also notify the insurer.
representation
state laws specify applicant’s statements on the application are representations, not warranties. only need to be SUBSTAINTIALLY accurate to the best of applicant’s knowledge
risk classification
describes the underwriting category into which risk is placed depending upon the applicant’s susceptibility to injury, illness, or death
special class
an applicant who cannot qualify for a standard policy, but may secure one with a rider waiving the payment for a loss involving a certain existing health impairment
standard risk
a person who, according to the underwriting standards, is considered an average risk and insurable at standard rates
substandard risk (impaired risk)
an applicant whose physical condition does not meet the usual minimum standards
underwriter
a 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 at what rate
underwriting
analysis of info obtained from various sources pertaining to an applicant and determination of whether or not the insurance should be issued as requested, offered a higher premium, or declined
warranties
must be absolutely and literally true, unlike representations. a breach of warranty may void the policy whether or not the warranty is material and whether or not such breach of warranty had contributed to loss
participating
policyholders participate in receiving dividends and elect board directors
