Life Insurance - Chapter 5: Underwriting and Policy Issue

Who is required to sign a life insurance applicaiton?

Adult insured, policyowner, & agent

Before a life insurance policy is issued, which of these components of the contract is required?

Applicants signature on the application

An incomplete life insurance application submitted to an insurer will result in which of these actions?

Application will be returned to the writing agent

When should a HIPPA disclosure be taken?

At the time of sale with the application

A pilot applies for Life insurance. The insurer approves the application with a $10 additional monthly premium modification due to the risk involved. The pilot declines the additional premium modification. The insurer will then likely issue the coverage with a...?

Aviation Exclusion

On August 6, D submitted an application for a $50,000 Life Insurance policy and did not pay the initial premium. On August 18, D went to the doctor complaining of chest pains and some tests were given by the doctor. The life policy was delivered by the producer on August 20 and D explains what had recently taken place with the doctor. What action should the producer then take?

Collect the initial premium along with a signed health statement

Correctly explain the actions an agent should take if a customer wants to apply for an insurance policy?

Complete the application and review the information with the customer prior to obtaining the customers signature, then send the application off to the insurance company.

K applies for a life insurance policy on herself and submits the initial premium with the application. She is given a receipt by the agent stating that coverage begins immediately if the application is approved. What kind of receipt was used?

Conditional -- indicates that certain conditions must be met in order for the coverage to go into effect

A ______ contained in a life insurance policy states that the policy will NOT cover certain risks.

Exclusion

Which Federal law allows an insurer to obtain an inspection report on a potential insured?

Fair Credit Reporting Act

From what authority derives the requirement that an insurance application contains a disclosure stating that an investigative consumer report may be obtained on an applicant?

Fair Credit and Reporting Act

What action should a producer take if the initial premium is NOT submitted with the applicaiton?

Forward the application to the insurer without the initial premium

Substandard

High Risk - Rated Up - Higher Premiums

What is the purpose of a policy summary?

It highlights the critical parts of the policy issued

On January 8, an applicant filled out an application for a life insurance policy but did not include the initial premium. The insurance company approved the application on January 14 and issued the policy January 15. The producer delivered the policy on January 26 and collected the first premium. When did the coverage become effective?

January 26

Preferred

Low risk, lower premiums

Declined

Not Insurable - Potential of Loss to Insurance Company is Too High

Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy February 13. How will the insurer handle this situation?

Policy was returned within the free-look period, premium will be full refunded.

Consumer reports requested by an underwriter during the application process of a life insurance policy can be used to determine?

Probability of making timely premium payments

What would the Medical Information Bureau (MIB) identify?

Testing positive for marijuana use from a previous screening.

Standard

average risk, no extra ratings or restrictions

A life insurance application may be rejected on the basis of?

medical history, hobbies, weight

Conditional Receipts

most common type of premium receipt -- provides that when the applicant pays the initial premium, coverage is effective on the condition that the applicant proves to be insurable either on the date the application was signed or the date of the medical exam

ABC Insurance Company has accepted a life insurance application which contains unanswered questions. The company then makes the application part of the life contract. In this situation, the insurer has

waived on of its legal rights

Under the USA Patriot Act, insurers are required to report receipt of cash payments in excess of?

$10,000

P is a producer who notices 5 questions on a life application were not answered. What actions should P take?

Set up a meeting with the applicant to answer the remaining questions

K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?

The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured

Binding Receipts

coverage is guaranteed until the insurer formally rejects the application, even if the proposed insured is ultimately found to be uninsurable

The underwiring process involves all of these...

credit report, risk classification, & application

Effective date

identifies when coverage is effective and established the date by which future annual premiums must be paid

Upon delivery of a rated life insurance policy, the Producer must obtain each of the following

signed amendment, signed statement of good health, the required premium

Respresentations

statements an applicant makes as being substantially true to the best of their knowledge and belief

Warranties

statements that are guaranteed to be correct & true -- if it isn't true in every detail, even if made in error, it can render a policy void

When does the free look period begin?

the date the policy is delivered to the owner: The free-look period begins on the date that the policy is delivered to the policyowner. If the policyowner is not satisfied for any reason, he or she can return the policy for a full refund of the premium paid.

In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and

the initial premium

Receipts

the only time a customer will receive one is if they pay their initial premium at the time of application, no receipt is given at any other time