Completing the Application, Underwriting and Delivering the Policy

In a life insurance policy, when must insurable interest exist?

Must exist between the policy owner and the insured at the time of application; however, once a life insurance policy has been issued, the insurer must pay the policy benefit, whether or not an insurable interest exist.

What is underwriting?

Its the risk selection and classification process. It involves a careful analysis of many different factors to determine the acceptability of applicants for insurance. It's the process in which an insurance company determines whether or not a particular applicant is insurable and if so what premium to charge.

Who is required to sign an application for life insurance?

Both the agent and the proposed insured usually the applicant must sign the application.

What are illustration in life insurance policies?

Presentation of depiction that includes nonguaranteed elements of a policy of individual or group life insurance over a period of years. A life insurance illustration must distinguish between guaranteed and projected amounts (page 109)

At what point does coverage begin when an agent issues a Conditional Receipt?

The coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, unless coverage is declined or rated or issued with riders excluding specific coverage.

When does an insurance policy go in effect?

The policy can be effective as early as the date of the application if the premium is submitted with the application and the policy is used in the classification or rating for which it was applied.

What is the purpose of the Fair Credit Reporting Act?

Established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant and properly used. The law protects consumers against the circulation of inaccurate or obsolete information.

How does substandard risk policy differ from a standard risk?

Standard risks- are persons who according to a company's underwriting standards are entitled to insurance protection without extra rating or special restrictions. Substandard risk-applicants are not acceptable at standard rates because of physical condition, personal, or family history of disease, occupation, or dangerous habits.

What is an attending physician's statement and when is it required?

The underwriter may require an Attending Physician's Statement from a medical practitioner who treated the applicant for prior medical problem. This is require for applicants of higher amounts of coverage or if the application raised additional questions concerning the prospective insured's health.

What are the four steps a producer must follow when replacing an existing policy?

Step 1- present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer, and a copy must be left with the applicant. Step2- Obtain a list of all existing life insurance and/or annuity policies to be replaced including policy numbers and the names of all companies being replaced. Step 3- Leave the applicant with the original or copy of written or printed communications used for presentation to the applicant. Step 4- Submit to the replacing insurance company, with the application, a copy of the replacement notice

What is the difference between a consumer report and an investigative consumer report?

Consumer report- written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources. Investigative Consumer-similar, they also provide information on the consumer's character, reputation and habits. The primary difference is that the information is obtained through an investigation and interviews with associates, friends and neighbors of the consumer

What does representation mean and how does it differ from a warranty?

Are statements believed to be true to the best of one's knowledge, but they are not guaranteed to be true. For instances purposes, representations are the answers the insured gives to the questions on the insurance application

When is a policy considered delivered?

Once the underwriting process has been completed and the company issues the policy, the agent will deliver it to the insured. Although personal delivery of the insurance policy is the best method of finalizing the insurance transaction, mailing the policy directly to the policy owner is acceptable.

How can insurance company use the information it contains from the MIB?

Only as an aid in helping insurers know what areas of impairment they might need to investigate further. (page 106)

What information is gathered in parts 1 and 2 of the application?

Part 1 General Information- General questions about the applicant. Such as name, age, address, birthdate, gender, income, marital status, and occupation. Part 2 Medical Information- Information on prospective insured's medical background, present health, any medical visits in recent years, medical status of living relatives, and causes of death of decreased relative.

What is the purpose of the agent's report?

Provides the agent's personal observations concerning the proposed insured .

When would an insured be required to sign a statement of good health?

This statement must be signed b the insured, and verifies that the insured has not suffered injury or illness since the application date.