Life Insurance Practice - Day 1
Declined Risk
- too high a risk - not covered
standard risk
-average exposures -covered at standard rate
Premium Determination
3 key factors for life insurance Mortality interest and expense
Process of Issuing a Life Insurance Policy
Solicitation and Presentation
Solicitation and Presentation Includes -
Solicitation(advertisement), Presentation(accurate and complete), Disclosure(buyers guide and policy summary)
representations
Statements that are true to the best of your knowledge
when does coverage begin?
coverage begins on the date of application or date of the medical exam, which ever occurs last
Disclosure
explains features and benefits of proposed policies
Buyers Guide
generic information, helps compare policies, provided at the time of application
Field Underwriters
help prevent adverse(high risk)selection
Incomplete application
if the insurer receives an incomplete application the insurer must return it to applicant for completion(missing signature), insurer issues policy with unanswered question on application (insurer waived its rights to have an answer)
Effective Date of Coverage
if the premium is not paid with the application, the agent must obtain the premium and a statement of continued good health at the time of policy delivery in this case, policy does not go into effect until premium has been collected
What is needed for every application
insurable interest and consent/permission from person being insured
Underwriting
insuring of risks that are more prone to losses than there average risk
(IOLI) Investor-owned life insurance
life settlement
Policy Issue and Delivery
mailing the policy - when the insurer relinquishes control of the policy by mailing it to the policyowner, policy is considered legally delivered.
Company Underwriting
multiple sources of information (application, consumer reports, MIB)
whose 3 signatures required on EACH application ?
policy owner, insured (with consent), and agent
classification of risks
preferred, standard, substandard, declined
Premiums with the application
premium reciept, conditional receipt - intended to provide conditional coverage
premium
premium tables determine the cost of insurance based on age and other underwriting factors, unearned premiums are refunded
Purpose of Fair Credit Reporting Act
protects consumers against the circulation of immaculate and obsolete information.
preferred risk
reduced risk of loss, covered at reduced rate
Underwriting includes
selection, classification, and/or rating of risks
Field Underwriting Responsibilities
solicit, complete the application with signatures, collect initial premium, deliver the policy, help prevent adverse selection
Policy Summary
specific information about policy, usually provided prior to or at policy delivery
STOLI vs life settlement
stoli - buying a new policy on a stranger, no insurable interest, life settlement - selling an existing life policy both are life insurance arrangement in which a person with no relationship to the insured purchases a life policy on the insureds life with intent of profiting
Fair Credit Reporting Act
the fair credit reporting act establishes procedures that consumer reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used.
medical exam
the insurer/ company must disclose the use of testing to the applicant and obtain written consent from the applicant on the approved form, insurer(insurance company) pays for the cost
mode
the more frequently premium is paid, the higher the premium, monthly would result in highest premium, yearly is cheapest
STOLI (stranger-originated life insurance)
violate the principle of insurable interest, a person with no insurable interest in the insured purchases a policy(stranger), PROHIBITED
Statements made on an insurance application
warranty, representations, misrepresentation
USA PATRIOT ACT/ ANTI MONEY LAUNDERING
was enacted on october 26 2001 to prevent terrorism and money laundering activities through monitoring of financial transactions, requires banks broker dealers and other financial institutions to establish new anti money laundering standards
When does coverage begin?
when policy is delivered unless premium is prepaid
changes to application
you must start over, cross out incorrect answer, write in correct answer and have person initial, cannot use white out or erase on a life insurance application
misrepresentations(untrue statements)
could void the contract, considered fraud if intentional and material
Application (a written request for insurance coverage to an insurance company)
basic and main source of underwriting information
Field Underwriting
Agent is the field underwriter, most important source of information
Policy Illustration
An educational image that shows a prospective policyholder how a policy works; this document factors in all policy's key details, including the applicant's or insured's age, gender and underwriting class; and any projected and guaranteed interest rates.
Health insurance Portability and Accounting Act HIPPA
Federal law that protects health information
Factors that influence life insurance
age, gender, tobacco usage, build, physical condition, health history both personal and family, occupation, hobbies, aviation, military, foreign travel
Main difference between buyers guide and policy summary
Buyers Guide - before you buy or get approved, Policy Summary - specific info about policy
Aleatory
Contract in which both parties exchange unequal values
Adhesion
Contract offered on a "take-it-or leave it" basis
Conditional
Contract requires that both the insured and the insurer meet certain conditions for the contract to be enforceable.
Agent's Report
agents personal observation, submitted with application but NOT part of the application
Application Part 1
General information - age, occupation, gender, etc....
Substandard Risk
Increased risk of loss, covered at increased rate
Mode of Premium Payment
Is defined as the frequency and the amount of the premium payment
Application Part 2
Medical Information
Insurable Interest
a financial interest in the life of another person or the possibility loosing something of value in the event of a loss
medical information bureau (MIB)
a nonprofit trade organization put together by insurance companies to alert insurers to adverse medical history, compare medical information they have collected on a potential insured with the information received from other member insurers
warranty
absolutely true statements