Chapter 7: Policy issuance and delivery

What is the time frame an insurance company is required to pay a death claim?

60 days after proper notification is received

Why is it encouraged to collect the initial premium with the application?

Because chances increase that the applicant will not accept the issued policy and no contract is enforced

Alice decides to buy a policy. She pays the first premium; the producer issues a receipt and tells her that she is covered immediately, until she is notified that the policy is either issues or declined. What kind of receipt has Alice received?

Binding receipt

What should an agent do when an insured dies?

Complete any proof of death from the company as soon as possible along with a death certificate

Which kind of receipt is most commonly used in life insurance?

Conditional receipt

What is replacement?

Is the purchase of one life insurance policy to replace another

What does the policy summary explain?

It addresses the specific product being presented for sale and identifies the agent, insurer, the policy, and each rider

what is considered a constructive delivery?

It's when the insurer mails a policy to its producer for actual delivery to the policyowner

what is fiduciary?

Its a person in a position of financial trust. Attorneys, accountants, trust officers, and insurance producers are considered fiduciaries

if the initial premium is paid at the time of the application on May 1, the company issues the policy as a standard issue on May 30, and the producer delivers the policy to the owner on june 5, when is coverage effective, assuming a conditional receipt was given and there was no medical exam required?

May 1

What are some reasons why a new policy might not be in the insureds needs?

New insurance requires applicant to prove insurability, premiums might be higher, new incontestable period, existing policy provisions might be more liberal than a new policy's, new policy does not have current cash values

Is an applicant obligated to accept an amended policy?

No, they may withdraw the application

If payment of a valid death claim is delayed what is the usual reason?

The insurer has NOT received proper notification of the death

Inspection receipt

The policy owner signs an inspection receipt for the policy, examines the policy, and then pays the first full premium

How does replacement affect customers?

They lose out on the old policy's interest rates and lose the cash value buildup, but sometimes the current policy does not favor current customer needs

What is the purpose of a conditional receipt

Usually makes the coverage effective as of the date of application if the applicant is found insurable under the companies underwriting rules

Will claims incurred during the underwriting period get paid?

Yes, they are paid whether or not the application ultimately would have been approved

Why is the effective date of coverage important?

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

What is the duty of a producer if a client gets a policy replacement?

list all existing life insurance policies to be replaced, give applicant notice regarding replacement of life insurance , and give insurer a copy of any proposal made and the name of the insurer of the policy that is to be replaced.

Unconditional or binding receipt

makes the company liable for the risk from the date of application. Coverage lasts for 60 days or until policy is issued

What are the insurer duties when replacing?

making cure all replacements are in compliance with state regulation, notifyuing each insurer whose insurance is being replaced and providing a copy of any proposal, maintaining copies of proposals and receipts

Lee applies for a policy, pays the initial premium, and receives a conditional receipt on March 14. On March 15, he passes the medical exam with flying colors. On March 16, an undiagnosed brain aneurysm bursts, killing Lee instantly. On March 17, the insurer receives the results of the medical exam, which includes no information about the aneurysm. On March 19, the insurer receives the notice of claims. The insurer will

pay claim

What happens if the premium deposit is not given with the application?

the policy effective date is usually the date the policy is issued by the insurance company. But it's not truly effective until it is delivered to the applicant, the first premium is paid, and a statement of good health is obtained

What happens if the insured should die before the policy is issued?

the proceeds will be paid to the beneficiary named in the policy. Proceeds will not be paid if policy beneficiary was not accepted.

Insurers sometimes require personal delivery so that

the producer can verify the insured's good health at the time of delivery

Why is personal policy delivery important?

to conduct a policy review of both new and existing coverage, explaining coverage and provisions, answer client questions, identifying effective date of coverage, explaining need for additional coverage, asking for referrals

Can an insurer amend a policy depending on the results of the underwriting process

yes, in order to exclude certain losses or conditions, or classify the applicant as a substandard risk.

An application is completed and submitted without an initial premium on July 1. A medical exam is required and completed on July 12. The company issues the policy as a standard issue on August 1, and the producer hand delivers the policy on August 4. When is coverage effective?

August 4, after the premium is paid and the statement of good health is signed

Camille decides to buy a policy. She pays the first premium, and the producer issues a receipt and tells her that she is covered immediately, unless the company decides she would have been a substandard risk. What kind of receipt did Camille receive?

Conditional receipt

Brenda decides that she wants to buy a policy. She fills out the application but does NOT pay the initial premium. What kind of receipt will Brenda receive?

Inspection receipt

What is a buyers guide?

It's 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

What is a legal delivery?

It's 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

What are the producers responsibilities upon an insureds death

Notify the insurance company immediately, contact beneficiary. help beneficiary complete a proof of death form, and send it to the company along with a death certificate.

Rich applies for a policy, pays the initial premium, and receives a binding receipt on Friday, Sept 1. On Monday, Sept 4, the underwriting department decides not to issue the policy and places the file in a pile for notification letters to be sent out at the end of the week. On Wed, Sept 6, Rich is killed in an auto accident. On Thurs., Sept 7, the insurer receives the notice of claim. The insurer will

Pay the claim because a binding receipt ensures coverage until the potential insured is notified of a rejection