Chapter 1

insurable interest

A financial interest in the life of another person; a possibility of losing something of value if the insured should die. In life and health insurance, insurable interest must be stated at the time of policy issue.

material misrepresentation

A misrepresentation that would effect the insurance company's evaluation of a proposed insured

Agent (Producer)

A person who acts for another person or entity known as the principal with regard to contractual arrangements with third parties; a legal representative of an insurance company.

Beneficiary

A person who receives benefits from the policy of insurance.

warranty (insurance)

An absolutely true statement upon which the validity of the insurance policy depends.

Substandard risk

An applicant or insured who has a higher than normal probability of loss, and who may be subject to an increased premium

Standard risk

An applicant or insured who is considered to have an average probability of a loss based on health, vocation and lifestyle.

Insurance

Transfers the risk of loss from an individual or business entity to an insurance company, which in turn spreads the costs of unexpected losses to many individuals.

Disclosure Authorization Notice

given to applicant when insurers plan to seek and use info from investigators.

IOLI (Investor-originated Life insurance)

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MIB (Medical Information Bureau)

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SAR (Suspicious Activity Report) Rules

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STOLI (Stranger-originated life insurance)

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misrepresentation

A false or misleading statement or assertion.

Insured

A person covered by an insurance policy

Declined risk

A proposed insured who is considered to present a risk that is too great for an insurer to cover.

attending Physician's Statement

A report or statement form in which the proposed insured's own doctor details the specifics of previous accidents, diseases, treatments, or prognoses.

Premium

A specific sum of money paid by the insured to the insurance company in exchange for financial protection against loss.

paramedical report

A type of the Part II application that contains the proposed insured's answers to medical history questions recorded by a paramedical examiner and the results of a paramedical examination conducted by a paramedical examiner.

Consumer report

A written and /or oral statement regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.

policy summary

A written statement that highlights the critical parts of the policy and provides an easy way to review coverages, riders, exclusions, and costs of the policy. It is required by most states to be included with the policy at the time of delivery. It will also include premium, cash value, dividend, surrender value and death benefit figures for specific policy years.

Fair Credit Reporting Act

Act that protects privacy of background information and ensures that information supplied is accurate.

Preferred Risk

An insurance classification for applicants who have a lower expectation of incurring loss, and who, therefore, are covered at a reduced rate.

Changes in the application

Any changes made to an insurance application after it is completed must be initialed by the applicant

Replacement

Any transaction in which new life insurance or a new annuity is purchased the existing insurance policy or annuity has been lapsred, forfeited, surrendered, terminated, reissued with any reduction in cash value...

Life Insurance

Insurance that provides death benefits to the survivors of the insured.

conditional receipt

Makes the coverage effective on the date of application if the company finds the applicant to have been insurable on that date

premium receipt

Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue?

Required Signatures

Several signatures are required to complete a life insurance application. Required signatures include the applicant, the proposed insured (if different from the applicant), and the agent soliciting the insurance.The agent's report must be completed and signed by the agent only. The Fair Credit Reporting Act Notice of Disclosure ("Notice to the Applicant") is also to be completed with the appropriate signatures.

Investigative consumer report

Similar to consumer reports in that they also provide information on the consumer's character, reputation, and habits.

Death Benefit

The amount payable upon the death of the person whose life is insured

Insurer

The insurance company that provides planned protection against economic losses

Policyowner

The person who is entitled to exercise the rights and privileges in the policy. This person may or may not be the insured.

Applicant (proposed insured)

a person who requests or seeks insurance from an insurer.

Insurance Policy

a written contract between the insured and an insurance company that promises to pay for all or part of a loss

underwriting

classifies the applicant based upon the underwriting requirements of the insurer; matches the risk presented with the premium charged by the insurer

representation

A basic principle of traditional democratic theory that describes the relationship between the few leaders and the many followers.

Buyer's guide

A booklet that describes insurance policies and concepts, and provides general information to help an applicant make an informed decision.

Agency Contract

A contract that is held between an insurer and an agent/producer, containing the expressed authority given to the agent/producer, and the duties and responsibilities to the principal.

disclosure statement

A document required by law that reveals specific information. For example, federal law requires that lenders give buyers a disclosure statement detailing the actual cost of borrowing money from the lender. See Good Faith Estimate.

Adverse selection

A high-risk person benefits more from insurance, so is more likely to purchase it.