Life Underwriting and policy issues Flashcards
Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of:
10,000
The process used by an insurance company to determine whether or not an applicant is insurable and if so, how much to charge for premiums.
Underwriting
Risk Classification
-determining the insurability of the individual
Material facts can affect an applicant being accepted or rejected.
What must exist between the policyowner and insured at
the time when the application is made.
Insurable interest
What are the 3 parts of insurance application?
Part I – General Information (Age, DOB, Sex, Address, Marital Status, Occupation)
Part II – Medical Information (Health History)
Part III – Agent’s Report – Agent’s personal observations of the applicant.
Includes the applicant’s financial condition, character, purpose of sale,
and how long agent has known the applicant.
Credit Report
An applicant’s credit history is sometimes used for underwriting and to determine the likelihood of making premium payments.
Guaranteed to be literally true….
Warranty
Statements made by applicants that are substantially true to the best of their knowledge, but not warrantied as exact in every detail.
Representation
Medical Report
- for policies with higher face amounts
- need an attending physician statement (APS)
What do Inspection Reports include?
information about the applicant’s character, lifestyle, and
financial stability
Who:
- detects misrepresentations
- helps identify fraudulent info
- controls the cost of insurance
Medical Information Bureau (MIB
Special Questionnaires
For special circumstances, such as aviation, military service, or hazardous occupations or hobbies
What are the Classification of Risk?
- Preferred – Low Risk – Lower Premiums
- Standard - Average Risk – No Extra Ratings or Restrictions
- Substandard – High Risk – Rated Up – Higher Premiums
- Declined – Not Insurable – Potential of Loss to Insurance Company is Too High
The ____ and the ______ are required to sign the application.
agent
applicant
The agent issues the applicant a ______ upon collecting the initial premium.
premium receipt
What are the 2 types of premium receipts?
• Conditional Receipt:
- when the application and premium are collected.
- coverage once certain conditions are met
• Binding Receipt:
- coverage from the date of the application regardless of whether the applicant is insurable.
- 30 to 60 days, or until the insurer accepts or declines the coverage.
Effective Date of Coverage
-with collection of the initial premium, approval of the application, and policy issuance and delivery
- If the
initial premium is not submitted with the application, the policy effective date is established by insurer.
Up to 6 months. This process is also known as “saves age”.
Backdating
Verifies that the insured has not become ill, injured or disabled during the policy approval process (time between submitting application and delivery of the policy), or did not submit the initial premium with the application
The Statement of good health
What allows the producer to explain the coverage to the insured (such as the riders, provisions, and options), builds trust and reinforces the need for the coverage.
Personal delivery
