Chapter #6: Life Insurance Underwriting and Policy Issue
Upon policy delivery, which of the following must a producer have an applicant sign if no initial premium was collected with the life insurance application?
A good health statement
Preferred
A risk whose physical condition, occupation, mode of living, and other characteristics indicate a prospect for longevity for unimpaired lives of the same age.
Policy Summary
A summary of the terms of an insurance policy, including the conditions, coverage limitations, and premiums. Policy summaries are often used with life insurance, long-term care insurance, and annuities.
General (Part 1)
Also includes details about the requested insurance coverage such as: 1. Type of policy 2. Amount of insurance 3. Name and relationship of the beneficiary 4. Other insurance applications the insured has pending 5. Other information sought may indicate possible exposure to a hazardous hobby, foreign travel, aviation activity, or military service. 6. Tobacco use
Binding Receipts
Are given by a company upon an applicant's first premium payment. The policy, if approved, becomes effective from the date of the receipt.
Inspection Reports
Are reports of an investigator providing facts required for a proper underwriting decision on applications for new insurance and reinstatements.
Representations
Are statements an applicant makes a being substantially true to the best of the applicant's knowledge and belief, but which are not warranted to be exact in every detail. They must be true only to the extent that they are material to the risk.
Warranties
Are statements that are guaranteed to be correct. A warranty that is not literally true in every detail, even if made in error, is sufficient to render a policy void.
In regards to a life insurance contract, which of the following statements is NOT true regarding the concept of insurable interest?
Insurable interest can be established sufficiently by sentimental attachment alone
Fair Credit Reporting Act
Is a federal law requiring an individual to be informed if she is being investigated by an inspection company. The law also outlines the sharing and impact of such information and requires individuals to be notified prior to being investigated.
Insurable Interest
Without insurable interest, an insurance contract is not legally enforceable and would be considered a wagering contract. Needs to only exist at the time of the application (the inception of the contract). A person is considered to have unlimited insurable interest in themselves.
APS
one of the most frequently ordered additional sources of medical background information and can be for a specific ailment (diabetes, broken leg, etc.) or for a general family doctor.
Risk Classification
Is the grouping of different risks according to their estimated cost or likely impact, likelihood of occurence, countermeasures required, etc.
Which of these is NOT considered to be a risk factor in life insurance underwriting?
Number of children
General (Part 1)
Asks general questions in the application about the proposed insured, including name, age, address, birth date, sex, income, marital status, and occupation
An attending physician's statement would be appropriate for which life insurance purpose?
At the request of the insurer to assist in the underwriting decision
Preferred risk policies with reduced premiums are issued by insurance companies because the insured has
Better than average mortality or morbidity experience
Field underwriting performed by the producer involves
Completing the application and collecting initial premium
All of these are typically sources of underwriting information for life or health insurance EXCEPT
Disclosure authorization response
Medical (Part 2)
Focuses on the proposed insured's health and asks a number of questions about the health history, not only of the proposed insured, but of the proposed insured's family, too. Must be completed in its entirety for every application.
An application intentionally lying to an insurance company on an application in order to obtain a cheaper premium is an example of
Fraud
Backdating
IS the practice of making a policy effective at an earlier date than the present. This is typically done to lower insurance premiums by ignoring a recent birthday. In most states, agents are allowed to back-date up to 6 months, provided the insurer allows this practice.
Application
Is a form supplied by the insurance company, usually filled in by the agent and medical examiner (if applicable) on the basis of information received from the applicant. It is signed by the applicant and then is apart of the insurance policy if it is issued.
Substandard
Is a person who is considered an under average or impaired insurance risk because of physical condition, family or personal history of disease, occupation, residence in unhealthy climate, or dangerous habits.
Standard
Is a person who, according to a company's underwriting standards, is entitled to insurance protection without extra rating or special restrictions.
Attending Physician Statement (APS)
Is a report ordered by the insurance company and completed by a physician, hospital or medical facility who has treated, or who is currently treating, a person seeking insurance.
Medical Information Bureau
Is a service organization that collects medical data on life and health insurance applicants for member insurance companies.
Credit Report
Is a summary of an insurance applicant's credit history, made by an independent organization that has investigated the applicant's credit standing.
Constructive Delivery
Is accomplished technically if the insurance company intentionally relinquishes all control over the policy and turns it over to someone acting for the policyowner, including the company's own agent.
Buyer's Guide
Is an informational consumer guide books that explain insurance policies and insurance concepts; in most states, they are required to be given to applicants when certain types of coverages are being considered.
Conditional Receipt
Is given to the policy owners when they pay a premium at the time of application. Such receipts bind the insurance company if the risk is approved as applied for, subject to any other conditions stated on the receipt.
Which of these is considered to be a document that describes the critical segments of a life insurance policy?
Policy Summary
An insurance producer is often responsible for field underwriting during the application process. All of these are possible field underwriting roles EXCEPT
Providing commission information to the applicant
Insurable Interest
Requires that an individual have a valid concern for the continuation of the life or well-being of the person insured.
Which of the following describes a person who is NOT acceptable by an insurer at standard rates because of health history, occupation, or hobbies?
Substandard risk
Agent's Report (Part 3)
The agent reports the applicant's financial condition and character, the background and purpose of the sale, and how long the agent has known the applicant.
Which of the following statements is CORRECT regarding an individual applying for life or health insurance?
The applicant's medical history may be analyzed and reported
Which of the following does a life insurance policy summary normally include?
The policy's cash value
What happens when an insurance policy is backdated?
The policy's effective date is earlier than the present
Medical (Part 2)
The proposed insured may be required to take a medical exam and/or provide a blood test or urine specimen. Physical exams, if requested by the insurer, are performed at the expense of the insurer.
Agent's Report (Part 3)
This area of the application reports personal observations about the proposed insured. The agent is expected to complete this part of the application fully and truthfully.
A field underwriter's main task is
To ensure an applicant's medical information is accurate and complete
USA Patriot Act
Was enacted in 2001 and requires insurance companies to establish formal anti-money laundering programs. The purpose of it is to detect and deter terrorism.
