Life Underwriting and policy issues

Question 1

Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of:

Answer 1

10,000

Question 2

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.

Answer 2

Underwriting

Question 3

Risk Classification

Answer 3

-determining the insurability of the individual

Material facts can affect an applicant being accepted or rejected.

Question 4

What must exist between the policyowner and insured at

the time when the application is made.

Answer 4

Insurable interest

Question 5

What are the 3 parts of insurance application?

Answer 5

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.

Question 6

Credit Report

Answer 6

An applicant’s credit history is sometimes used for underwriting and to determine the likelihood of making premium payments.

Question 7

Guaranteed to be literally true….

Answer 7

Warranty

Question 8

Statements made by applicants that are substantially true to the best of their knowledge, but not warrantied as exact in every detail.

Answer 8

Representation

Question 9

Medical Report

Answer 9

• for policies with higher face amounts

- need an attending physician statement (APS)

Question 10

What do Inspection Reports include?

Answer 10

information about the applicant’s character, lifestyle, and

financial stability

Question 11

Who:

• detects misrepresentations
• helps identify fraudulent info
• controls the cost of insurance

Answer 11

Medical Information Bureau (MIB

Question 12

Special Questionnaires

Answer 12

For special circumstances, such as aviation, military service, or hazardous occupations or hobbies

Question 13

What are the Classification of Risk?

Answer 13

• 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

Question 14

The ____ and the ______ are required to sign the application.

Answer 14

agent

applicant

Question 15

The agent issues the applicant a ______ upon collecting the initial premium.

Answer 15

premium receipt

Question 16

What are the 2 types of premium receipts?

Answer 16

• 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.

Question 17

Effective Date of Coverage

Answer 17

-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.

Question 18

Up to 6 months. This process is also known as “saves age”.

Answer 18

Backdating

Question 19

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

Answer 19

The Statement of good health

Question 20

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.

Answer 20

Personal delivery