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