Life Insurance Practice - Day 1

Declined Risk

- too high a risk - not covered

standard risk

-average exposures -covered at standard rate

Premium Determination

3 key factors for life insurance Mortality interest and expense

Process of Issuing a Life Insurance Policy

Solicitation and Presentation

Solicitation and Presentation Includes -

Solicitation(advertisement), Presentation(accurate and complete), Disclosure(buyers guide and policy summary)

representations

Statements that are true to the best of your knowledge

when does coverage begin?

coverage begins on the date of application or date of the medical exam, which ever occurs last

Disclosure

explains features and benefits of proposed policies

Buyers Guide

generic information, helps compare policies, provided at the time of application

Field Underwriters

help prevent adverse(high risk)selection

Incomplete application

if the insurer receives an incomplete application the insurer must return it to applicant for completion(missing signature), insurer issues policy with unanswered question on application (insurer waived its rights to have an answer)

Effective Date of Coverage

if the premium is not paid with the application, the agent must obtain the premium and a statement of continued good health at the time of policy delivery in this case, policy does not go into effect until premium has been collected

What is needed for every application

insurable interest and consent/permission from person being insured

Underwriting

insuring of risks that are more prone to losses than there average risk

(IOLI) Investor-owned life insurance

life settlement

Policy Issue and Delivery

mailing the policy - when the insurer relinquishes control of the policy by mailing it to the policyowner, policy is considered legally delivered.

Company Underwriting

multiple sources of information (application, consumer reports, MIB)

whose 3 signatures required on EACH application ?

policy owner, insured (with consent), and agent

classification of risks

preferred, standard, substandard, declined

Premiums with the application

premium reciept, conditional receipt - intended to provide conditional coverage

premium

premium tables determine the cost of insurance based on age and other underwriting factors, unearned premiums are refunded

Purpose of Fair Credit Reporting Act

protects consumers against the circulation of immaculate and obsolete information.

preferred risk

reduced risk of loss, covered at reduced rate

Underwriting includes

selection, classification, and/or rating of risks

Field Underwriting Responsibilities

solicit, complete the application with signatures, collect initial premium, deliver the policy, help prevent adverse selection

Policy Summary

specific information about policy, usually provided prior to or at policy delivery

STOLI vs life settlement

stoli - buying a new policy on a stranger, no insurable interest, life settlement - selling an existing life policy both are life insurance arrangement in which a person with no relationship to the insured purchases a life policy on the insureds life with intent of profiting

Fair Credit Reporting Act

the fair credit reporting act establishes procedures that consumer reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used.

medical exam

the insurer/ company must disclose the use of testing to the applicant and obtain written consent from the applicant on the approved form, insurer(insurance company) pays for the cost

mode

the more frequently premium is paid, the higher the premium, monthly would result in highest premium, yearly is cheapest

STOLI (stranger-originated life insurance)

violate the principle of insurable interest, a person with no insurable interest in the insured purchases a policy(stranger), PROHIBITED

Statements made on an insurance application

warranty, representations, misrepresentation

USA PATRIOT ACT/ ANTI MONEY LAUNDERING

was enacted on october 26 2001 to prevent terrorism and money laundering activities through monitoring of financial transactions, requires banks broker dealers and other financial institutions to establish new anti money laundering standards

When does coverage begin?

when policy is delivered unless premium is prepaid

changes to application

you must start over, cross out incorrect answer, write in correct answer and have person initial, cannot use white out or erase on a life insurance application

misrepresentations(untrue statements)

could void the contract, considered fraud if intentional and material

Application (a written request for insurance coverage to an insurance company)

basic and main source of underwriting information

Field Underwriting

Agent is the field underwriter, most important source of information

Policy Illustration

An educational image that shows a prospective policyholder how a policy works; this document factors in all policy's key details, including the applicant's or insured's age, gender and underwriting class; and any projected and guaranteed interest rates.

Health insurance Portability and Accounting Act HIPPA

Federal law that protects health information

Factors that influence life insurance

age, gender, tobacco usage, build, physical condition, health history both personal and family, occupation, hobbies, aviation, military, foreign travel

Main difference between buyers guide and policy summary

Buyers Guide - before you buy or get approved, Policy Summary - specific info about policy

Aleatory

Contract in which both parties exchange unequal values

Adhesion

Contract offered on a "take-it-or leave it" basis

Conditional

Contract requires that both the insured and the insurer meet certain conditions for the contract to be enforceable.

Agent's Report

agents personal observation, submitted with application but NOT part of the application

Application Part 1

General information - age, occupation, gender, etc....

Substandard Risk

Increased risk of loss, covered at increased rate

Mode of Premium Payment

Is defined as the frequency and the amount of the premium payment

Application Part 2

Medical Information

Insurable Interest

a financial interest in the life of another person or the possibility loosing something of value in the event of a loss

medical information bureau (MIB)

a nonprofit trade organization put together by insurance companies to alert insurers to adverse medical history, compare medical information they have collected on a potential insured with the information received from other member insurers

warranty

absolutely true statements