Life Insurance Underwriting & Policy Issue

Answer 1

1.

Question 2

Special Questionnaires

Answer 2

1. May be required for underwriting purpose to provide more detailed info related to aviation, avocation, foreign residenc, finanes, military service, or occupation.
2. Example: aviation questionniare for an applicant who spends a significant amount of time flying.

Question 3

Medical Information Bureau

Answer 3

non-profit organization that stores the health or medical information of people who were previously insured. Insurance companies in the U.S. use this information to determine the premium price for individual health and life insurance policies.

1. identify life insurance in force with other carriers
2. report life style habits such as drug use, drinking and smoking
3. Formed by 700 member insurance companies
4. Can only be released to the member companies
5. Can only be used for underwriting and claim purposed
6. may be released to the proposed insured’s physician

Question 4

USA Patriot Act

Answer 4

Passed in 2001

includes provisions intended to prevent the financial services industry, including the insurance sector, from being used for money laundering and terrorist financing by criminals and terrorists.

Question 5

Inspection Report

Question 6

The Medical Report

Answer 6

1. Non-medical limits, applications < a certain face amount (perhaps $50,000 or even $100,000) will not require any additional medical information other than provided in the application;
2. A medical report may be required for larger policies.
3. Must be completed by a qualified person. Doesn’t need to be a physician, can be a registered nurse or paramedic.

Question 7

The Fair Credit Reporting Act of 1970

Answer 7

a federal law that regulates the collection of consumers’ credit information and access to their credit reports. It was passed in 1970 to address the fairness, accuracy, and privacy of the personal information contained in the files of the credit reporting agencies.

• An insurance applicant must be informed of their rights that fall under the Fair Credit Reporting Act upon completion of the application.

Question 8

Applicant Ratings

Answer 8

Risk classification

• The majority of insurance applicants fall within an insurer’s underwriting guidelines
• 3 risk classes: 1) preferred risk; 20 standard risk; 3) substandard risk

Question 9

Preferrred Risk

Answer 9

Question 10

Initial Premium

Answer 10

the amount paid at the inception of an insurance contract.

An applicant doesn’t own a life insurance ‘til the initial premium is paid up.

Question 11

Conditional Receipts

Answer 11

if the insured is deemed to be covered by the insurer, the coverage begins on the date the insured receives the conditional binding receipt. Typically, a premium payment must be received by the insurer along with a completed acceptable application in order for the insured to obtain the receipt. This may also be called a “conditional receipt” or a “binding receipt,” depending on the type of insurance.

The conditional receipt is most common. Under a conditional receipt, the applicant and the insurance company form a “conditional” contract that is contingent upon the conditions that existed when an application or medication exam is completed. It provides that the applicant is covered immediately as long as they pass the insurer’s underwriting requirements. It is the insurance agent’s responsibility to tell the applicant they are covered on the condition they prove to be insurable and pass a medical exam if one is required.

Question 12

Binding Receipt

Answer 12

a receipt given to an applicant for insurance confirming that the application has been signed and the first premium paid and stipulating that the insurance shall go into effect immediately if the risk proves to be acceptable irrespective of the date of delivery of the policy