Ch 5 Life Ins Underwriting & Policy Issue

Disclosure form

A comparison form required by various state regulatory agencies to be given to every policyowner when replacing an existing policy with another.

Medical Information Bureau (MIB)

A service organization that collects medical data on life and health insurance applicants for member insurance companies.

Fair Credit Reporting Act

Law that grants consumers to the right to know who requests to view their credit report over the past year

Warranties

Most State laws specify that the applicant's statements on the application are considered representations and not warranties. -this must be absolutely and literally true. A breach of warranty may be sufficient to void the policy whether or not the warranty is material and whether or not such breach of warranty had contributed to the loss.

Policy Summary

Summarizes the basic terms of an insurance policy, including the conditions, coverage limitations, and premiums.

Rated Policy (Rating Up)

The basis for an additional charge to the standard premium because the person insured is classified as a higher than average risk. -The above standard rates usually result from impaired health or hazardous occupations

Standard Risk

describes a person who, according to a company's underwriting standards, is considered an average risk and insurable at standard rates. -High-risk or low-risk candidates may qualify for increased or discounted rates based on their deviation from the standard.

Evidence of insurability

describes a statement or proof of a person's health history and current health status that qualifies that person for coverage.

Special class

describes an applicant who cannot qualify for a standard policy, but may secure one with a rider waiving the payment for a loss involving certain existing health impairments. - They may be required to pay a higher premium or to accept a policy of a type other than the one for which he has applied.

Preferred Risk

describes 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.

Substandard Risk

describes an applicant whose physical condition does not meet the usual minimum standards. if the substandard classification is due to adverse health, the application may be declined or written with a "rated-up" premium. an applicant may be in excellent health but considered substandard due to their activities, hobbies, or avocations

Declined Risk

describes an individual whose application for coverage was rejected by an insurance company.

risk classification

describes the underwriting category into which risk is placed depending upon the applicant's susceptibility to injury, illness, or death.

Field Underwriter

the agent or producer completing the applicant's application for insurance.

Age Change

the date halfway between birthdays when the applicant's age changes to the next higher age. -With some insurers, the age is based upon the applicant's age at his nearest birthday. -In others, it is based upon the age of his last birthday.

Adverse Selection

the tendency of a disproportionate # of poor risks to seek or buy insurance or maintain existing insurance in force. (I.e, the selection against the insurance company) -sound underwriting reduces this selection