Policy Issuance and Delivery

Inspection Receipt

Occasionally, the proposed insured wants to examine the policy carefully before actually purchasing it. In this situation, the policyowner does not pay the first full premium at the time the application is completed. The policyowner signs an inspection receipt for the policy, examines the policy, and then pays the first full premium.

Policy Review

Once the policy is delivered to the policyowner, the producer should thoroughly explain all coverage provisions, particularly the exclusions, and any riders.

professional

a person in an occupation requiring an advanced level of training, knowledge, or skill.

reasons that a new policy might not be in the insured's best interests

1. New insurance requires the applicant to prove insurability. 2. Premiums may be higher for a new policy. 3. New policy provisions will have to be complied with, such as a new incontestable period. 4. The existing policy's provisions may be more liberal than a new policy's provisions. 5. Generally, a new policy will not have current cash values.

Ethics

setting a standard of conduct or behavior based on established values.

Producer's fiduciary duty

The producer must be knowledgeable about the features and provisions of various insurance policies as well as know the use of these insurance contracts. The producer must be able to explain the important features of these policies of the insured. the producer must know and comply with the state's insurance laws.

Conditional Receipt

This receipt usually makes the coverage effective as of the date of application, if the applicant is found to be insurable under the company's general underwriting rules. Some of these types of receipts make coverage effective on the date of application, or the date of a required medical examination, whichever is later.

Mailing the Policy

Legally, the policy is considered delivered when it is mailed to or turned over to the policyowner or someone acting on the policyowner's behalf.

Conservation

describes any attempt by an existing insurer to dissuade a policyowner from replacing existing life insurance

Binding Receipt (unconditional)

that makes the company liable for the risk from the date of application, regardless of the applicant's insurability. This coverage lasts for a specified time (usually 30 to 60 days) or until the insurer issues the policy, if earlier. If the application is rejected, coverage terminates at the end of the specified period. This type of receipt is rarely used for life insurance policies, though it is commonly used for auto or homeowners insurance.

Buyer's Guide

a generic publication that explains life insurance in a way that average consumers can understand. It does not address the specific product or policy being considered. This as well as a policy summary are due before the agent accepts the initial premium.

Policy Summary

addresses the specific product being presented for sale. It identifies the agent, the insurer, the policy, and each rider. It includes information about premiums, dividends, benefit amounts, cash surrender values, policy loan interest rates, and life insurance cost indexes.

Constructive delivery

the insurer mails a policy to its producer for actual delivery to the policyowner because the insurer has issued the policy and released it for delivery. However, a legal delivery has not yet occurred if the insurer requires personal delivery for verification of good health at the time of delivery or if the policy is being provided to the applicant merely to review and inspect at that time and not necessarily to buy.

Replacement

the purchase of one life insurance policy to replace another. Because of the cash values that can build up in a policy and the favorable loan interest rates in older policies, replacement can be disadvantageous to consumers. Commissions paid to producers for selling a new policy are particularly lucrative. For this reason, unscrupulous producers have persuaded consumers to give up old policies for new ones, even if it was not in the consumers' best interests.

Personal delivery

If a conditional receipt has not been issued, the insurer may require the producer to obtain a statement of good health at the time of policy delivery. it is usually recommended because it also gives the agent an opportunity to enhance the agent-client relationship by: conducting a policy review of both new and existing coverages; explaining coverages and policy provisions and answer any questions the client has; identifying the effective date of coverage; explaining the possible need for any additional coverages or amounts of insurance; and asking the client for referrals.

Submitting the Application and Initial Premium

It is important for the producer to submit the application, initial premium, and any questionnaires or other forms promptly after reviewing all forms for completeness and making sure that they are properly signed. Because producers are handling money belonging to their clients, it is extremely important that an accurate record of transactions be kept.

How do producers promote retention

The client's needs change at such times as marriage, the birth of a child, and death. The producer acts as the representative of the company in changing beneficiaries, adding amounts of insurance, and facilitating payment of claims.

Amendments

The insurer may amend the policy's terms depending on the results of the underwriting process. The insurer may, for instance, amend the policy to exclude certain losses or conditions, or it may classify the applicant as a substandard risk for which it will charge a higher premium. The applicant is not obligated to accept the amended policy and may withdraw the application.

Statement of Good Health

When the initial premium is not paid until the policy is delivered, the agent must also obtain a statement signed by the insured attesting to the insured's continued good health before leaving the policy with the insured.

Producer Responsibilities Upon Insured's Death

When the producer is made aware of an insured's death, the first task is to notify the company immediately. The producer should contact the beneficiary (or the beneficiary's legal representative). The producer should help the beneficiary complete a proof of death form and send it to the company along with a death certificate.

According to the conditional receipt, if the proposed insured should die before the policy is issued, one of the following will occur.

1. The proceeds will be paid to the beneficiary named in the policy if the company would have issued the policy to the proposed insured if he had been living. 2. The proceeds will not be paid to the policy's beneficiary if the company would not have issued the policy. Instead, the premium will be returned.

3 reasons for Payment Less than Face Amount

1. when there is an outstanding loan against the cash value of a policy. The amount of the loan, plus any interest outstanding, is deducted from the face amount of the policy before payment is made to the beneficiary. 2. when a premium payment is due. With insurance premiums, as with many other types of bills, there is a grace period of somewhere between a week and a month after the due date. If the insured dies within this grace period, the amount of premium due is deducted from the face amount of the policy before payment is made to the beneficiary. 3. there is an error made in determining the age or gender of the insured when the policy was issued. If such an error is discovered at the time of death, the insurance company will compute the face amount that the premium would have purchased if the accurate information was used and pay that amount to the beneficiary.

Issuing a policy with a waiver

death by a particular event (perhaps reflecting an occupation or recreational exposure) will not be covered. In other cases, an insurer might issue a more limited form of coverage or a policy with lower limits than those applied for by the applicant.

Effective Date of Coverage

important for two reasons: not only does it identify when the coverage is effective, it also establishes the date by which future annual premiums must be paid. If a receipt (either conditional or binding) was issued in exchange for the payment of an initial premium deposit, the date of the receipt will generally be the policy effective date. If a premium deposit is not given with the application, the policy effective date is usually the date the policy is issued by the insurance company. However, the policy will not be truly effective until it is delivered to the applicant, the first premium is paid, and a Statement of Good Health is obtained.

Producers duty in replacement

include obtaining, along with the application, a signed statement from the applicant as to whether insurance is to be replaced and submitting the statement to the insurer. as well as list all existing life insurance policies to be replaced; give the applicant a Notice to Applicants Regarding Replacement of Life Insurance (a copy of the forms should be left with the applicant); and give the insurer a copy of any proposals made and the name of the insurer of the policy that is to be replaced.

Reasons to collect initial premium at the time of application

If the applicant does not pay the initial premium at the time of application, chances increase that the applicant will not accept the issued policy. Also if the applicant waits to pay the premium, he may become uninsurable or may die before the policy takes effect. When the producer delivers the policy and collects the initial premium, there may be additional underwriting requirements to be satisfied. Most commonly, the insurance company may require that the insured sign a health statement verifying that no change in health has occurred since application.

Payment of Claims

In most states, life insurance companies are required to pay death claims within a specified period after proper notification is received (usually 60 days). When an insured dies, the agent should complete any proof of death form the company requires, have it signed by the necessary parties, and forward it to the company as soon as possible along with a death certificate.

Duties of the Insurer

Making sure that all replacements are in compliance with state regulations ; Notifying each insurer whose insurance is being replaced and, upon request, furnishing a copy of any proposal ; and Maintaining copies of proposals and receipts

Temporary Insurance Agreement

This type of receipt or agreement provides the applicant with immediate life insurance coverage whether or not the individual is found to be insurable, while the underwriting process is taking place. The insurer has the right to cancel this coverage if the applicant fails to meet the company's normal underwriting requirements. However, claims incurred during the underwriting period will be paid whether or not the application ultimately would have been approved.

With replacement, existing life insurance or annuities will be:

lapsed, forfeited, surrendered, or terminated; converted to reduced paid-up insurance, continued as extended term insurance, or reduced in value by the use of nonforfeiture benefits or other policy values; amended to produce a reduction in the benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid; or reissued with a reduction in cash value.