completing the application, underwriting, and delivering the policy

warranty

absolutely true statement that the insurance policy depends on. breach of warranty can be grounds for voiding the policy

USA PATRIOT ACT

address social, economic and global initiatives to fight and prevent terrorist activities. enabled finCEN to establish anti-money laundering (AML)

initial premium

agents attempt to collect initial premium and submit it with the application

contract

agreement between two or more parties that is enforceable by law

prohibited information

bankruptcies more than 10 years old. civil suits, records of arrest or convictions more than 7 years old

HIPAA

federal law that protects health info. privacy rule: patients have right to view own medical records and who has accessed them

dividends

generated when the premiums and the earnings combined exceed the actual costs of providing coverage ARE NOT GUARANTEED

agency contract

held between insurer and agent/producer. says the authority that's given to the agent/producer and duties and responsibilities to the principal. agent who violates can be held liable

nonmedical application

if amount of insurance is small, agent and insured will complete the medical info. larger amounts will require medical exam

material missrepresentation

if discovered would alter the underwriting decision of insurance company. if they are intentional, they are FRAUD

when coverage begins

if initial premium isn't paid with application, agent will collect it at policy delivery. agent may get statement of good health thats signed by insured saying nothings happened since application

agent/producer

legal representative of an insurance company. producer: agent and broker agent: agents of the insurer insurer: principal

foreign insurer

operating in a state other than incorporated in

delivering the policy

personal delivery is best. when insurer mails policy it is considered legally delivered. it is advisable to obtain a delivery receipt

illustration

presentation that includes non guaranteed elements of policy over a period of years. distinguishes between guaranteed and projected amounts. clearly state that an illustration isn't part of contract. identify those values that aren't guaranteed.

federal credit reporting act

procedures that consumer reporting agencies must follow. protects consumers against inaccurate personal or financial information. person who knowingly obtains false info can be fined or in prison for 2 YEARS. person who UNKNOWINGLY violates is liable equal to loss of consumer

buyers guide

provides basic info about life insurance policies. insurers must provide one to all prospective applicant before accepting their initial premium.

consideration

something of value that each party gives. insured is payment of premium insurer is the promise to pay in event of loss

changes in application

start over with new or make adjustments and have insured initial the change

domestic insurer

state they are incorporated in

representations

statements believed to be true to best of knowledge, but not guaranteed. answers insured gives on application

policy owner

the person who is entitled to exercise the rights and privileges in the policy

missrepresentation

untrue statements on application

premium receipt

agents must issue premium receipt. the type of receipt issued will determine when coverage will be effective

elements of a legal contract

agreement consideration competent parties legal purpose

underwriting: agents report

allows the agent to communicate with the underwriter and provide info about applicant known by the agent

death benefit/face amount/face value

amount paid when claim is issued against policy of insurance

declined risks

applicants who are rejected can be declined for: no insurable interest medically unacceptable potential for loss is great insurance is prohibited by public policy

required signatures

both the agent and the insured must sign the application. if proposed insured and policy owner aren't same person, the POLICY OWNER must sign application EXCEPTION: minor is insured

domicile of insurer

can be defined by their location of incorporation

conditional contract

certain conditions must be met by the policy owner and company. insurer must pay premium and provide proof of loss before insurer covers claim

HIV testing

common for insurers to require one when applying for large amount of coverage or increased and additional benefits. insurer must disclose use of testing and get written consent from them. must establish confidentiality

insurer (principal)

company who issues policy of insurance

field underwriter

company's front line. the one who has solicited potential insured

policy denied because of info found

consumer has right to know what is in report. consumer can challenge and reporting agency has to reinvestigate. if report was inaccurate and corrected, agency must send corrected info to all parties that were wrong from last two years

medical information bureau (MIB)

membership corporation owned by insurance companies. nonprofit organization that receives medical info from other insurance companies. companies can compare info they collected on potential insured. applicant CANT be refused based off this

premium

money paid to the insurance company for the policy of insurance

alien insurer

outside of the US

investor-owned life insurance

third party investor who has no insurable interest in insured sells policy ownership rights to someone with no insurable interest and wants to make a profit

medical exams

underwriter may require medical exam. exams are conducted on insurance company's expense. more common with life insurance

consumer reports

written/oral info about consumers: credit character reputation habits collected by reporting agency from employment records, credit reports

what does insurance do?

insurance transfers the risk of loss from an individual or business to an insurance company. it spreads the costs of unexpected losses to several individuals

investigative consumer report

info obtained through investigation and interviews with: associates friends neighbors cannot be made unless consumer is advised in writing within 3 DAYS of requested report. consumer can request additional info and the reporting agency has 5 DAYS to provide consumer with additional information

aleatory contract

insurance contracts that are an exchange of UNEQUAL amounts or values premium paid by insured is small compared to amount that will be paid if loss

insurance policy

contract between policy owner and insurance company which agrees to pay insured or beneficiary for loss

legal purpose

contract must be legal and not against public policy. INSURABLE INTEREST AND CONSENT contract without legal purpose is void

life insurance

coverage on life, granting, purchasing or disposing of annuities

suspicious activity reports

deposits, withdrawals, transfers etc. with $5,000 or more are reported if insurer has reason to suspect

policy summary

describes the features and elements of the policy. must include name and address of the agent, generic name of the basic policy and each rider. includes premium, cash value, dividend, surrender value and death benefit

standard risks

entitled to insurance protection without extra rating or special restrictions. representative of majority of people their age

disclosure of insurance info

every applicant for life insurance policy must get disclosure that gives basic info about cost and coverage. must be given NO LATER than time of application is signed

application: part two-medical information

medical background, present health, medical visits in recent years, medical status of living relatives, causes of death of relatives.

paramedical exam

medical exam completed by paramedic or nurse

attending physicians statement

medical exam from practitioner who treated applicant before medical problem

preferred risks

meet certain requirements and qualify for lower premiums. superior physical condition, lifestyle and habits

conditional receipt

most common conditional receipt says the coverage will be effective either on the date of application or date of medical exam WHICHEVER OCCURS LAST as long as they are insurable

competent parties

must be capable of entering contract both parties have to be: legal age mentally competent not under influence of alcohol

incomplete application

must return the application for completion. if it is incomplete, the insurer waives right to have an answer to question. won't have right to deny coverage based on info that was unanswered

application: part one-general information

name, age, address, birth date, gender, income, marital status, occupation. ask the existing policies and if the proposed will replace them. identifies the type of policy applied for, amount of coverage and info about beneficiary

substandard (high exposure risk)

not acceptable at standard rates because of health condition, personal or family history. "RATED" because they could be issued with premium rated-up

insurable interest for beneficiaries

not required

offer and acceptance

offer of one party and acceptance on another applicant makes the offer when submitting the application insurer's underwriter approves application

unilateral contract

only ONE party is legally bound to do anything insured makes NO legally binding promises

mutual companies

owned by policy owners and issue participating policies

stock companies

owned by stockholders who provide capital (insurer) necessary to establish and operate the insurance company and who shares in any profit or losses

underwriting: application

person applying for insurance must submit application. one of the main sources of underwriting

insured

person who is covered on policy. doesn't have to be policy owner

beneficiary

person who receives benefits from policy

applicant/proposed insured

person who seeks insurance from insurer

stranger-oriented life insurance (STOLI)

person with no relationship to insured purchases life policy on insureds life with the intent of selling policy once they die. violates the principle of INSURABLE INTEREST. buying a new policy on stranger

agent's report

personal observations concerning the proposed insured

insurable interest

policy owner must know possibility of losing money or something of value in the event of a loss. LIFE INSURANCE: must exist between policy owner and insured at the time of the application

valid insurable interest may exist between policy owner and insured when policy is insuring

policy owner's life life of family member life of a business partner

participating policies

policy owners are entitled to dividends which are a return of excess premiums and are nontaxable

nonparticipating policies

policy owners don't share in profit or losses. doesn't pay dividends to policy owners, but taxable dividends are paid to stockholders

contract adhesion

prepared by insurer and accepted or rejected by insured NOT NEGOTIABLE, INSURED HAS LITTLE TO SAY take it or leave it

responsibilities of field underwriter

proper solicitation of applicants helping prevent adverse selection obtaining required signature collecting the initial premium, giving receipt delivering the policy

underwriting

risk selection and classification process. process where insurance company determines whether or not a particular applicant is insurable and what premiums to charge

insurance transaction

solicitation negotiation sale advising an individual concerning coverage or claims

replacement

terminating existing policy or letting it lapse and getting a new one