NJ Insurance Prep (Chapter One Reading)

Responsibilities of a Field Underwriter

-Proper solicitation of applicants -Helping prevent adverse selection -Completing the application -Obtaining the required signatures -Collecting the initial premium and issuing the receipt -Delivering the policy

Three primary factors that are used in premium distribution:

-Risk -interest -Expense

A life insurance illustration must do following:

-distinguish between guaranteed and projected amounts -clearly state that an illustration is not a part of the contract -Identify those values that are not guaranteed as such.

Laws and Regulations for insurers requiring an applicant to submit a HIV test

-the insurer must disclose the use of testing to the applicant and obtain written consent from the applicant on the approved form -The insurer must establish written policies and procedures for the internal dissemination of test results among its producers and employees to ensure confidentiality

Process of Issuing Life Insurance

1. Solicitation and Sales Presentations 2. Underwriting: Field and Company 3. Premium Determination 4. Policy Issue and Delivery

Application/Proposed Insured

A person applying for insurance

Nonmedical Application

A policy requested when the applicant's age, medical history or amount of coverage does not require a medical examination for underwriting. Health questions on the application are asked by the producer and are the only medical information required.

Replacement

A practice of terminating an existing policy or letting it lapse, and obtaining a new one.

Declined Risk

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

Delivery Receipt

A receipt signed by the consignee as proof that the goods have been delivered to him.

Material Misrepresentation

A statement that, if discovered, would alter the underwriting decision of the insurance company.

Annuity

A way to provide income for the rest of your life

Grace Period

Allows the insured's coverage to continue 30 days from the premium past due date, but to protect the insurer the policy terminates after that 30 days if the premium is not received

"Free Look Provisions"

Allows the policy holder to review the policy and return the policy for a full refund. Usually 10 days

Warranty

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

Exception to the proposed insured signing the application

An adult, such as a parent/guardian, applying on behalf of a minor child

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.

Riders

Are additions to a life insurance policy that costs extra

Options

Are choices on how to distribute a sum of money

Who must sign the application?

Both the agent and the proposed insured (usually the applicant)

Conditional Receipt

Coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, unless coverage is declined or rated, or issued with riders excluding specific coverage.

The Privacy Rule allows...

Disclosures without individual authorization to public health authorities

The policyowner must

Have insurable interest in the life of the insured

Consumer Report

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

Protected Health Information (PHI)

Individually identifiable health information that relates to physical/mental health condition or payment information that can identify the individual

Preffered Risk

Individuals who meet certain requirements and qualify for lower premiums than the standard risk, these individuals have a superior physical condition, lifestyle, and habits

Medical Information of Application

Information on the prospective insured's medical background, present health, medical visits in recent years, medical status of living relatives, and causes of death of deceased relatives

Written Disclosure Authorization Notice

Insurers who plan to seek and use information from investigators they must first provide the applicant/insured with this

Fraud

Intentional misrepresentation or deceit with the intent to induce a person to part with something of value.

Life Insurance Policy

Legally binding contracts between the insured and the insurer (insurance company)

Policy Proceeds

Money paid to beneficiary

What shouldn't an agent do?

Never erase/white out any information on an application for insurance

Annuity Owner

Pays premiums into an annuity

What is the Purchase of Life Insurance?

Policy owner pays premium ton insurance company, the Insurance Company issues the policy and pays benefit to beneficiary, and the Beneficiary receives benefit upon insured's death

Estate

Proceeds of a life insurance policy create an immediate "estate: to the beneficiary. Can be used for anything

Consumer reports cannot contain,

Prohibited information

Policy Provision

Protect the policy owner, the insured, and the insurer

Premium Rider

Protects the policy owner and may be added to a policy to waive the premiums if the insured becomes disabled

Buyer's Guide

Provides basic information about life insurance policies that contains, and is limited to, language approved by the Department of Insurance

Whole Life Insurance

Provides both protection and cash value. Has 3 types: Straight Life, Limited Pay, and Single Pay

Agent's (producer's) report

Provides the agent's personal observations concerning the proposed insured

Premium Receipt

Receipt given to the applicant by the producer or insurer, as proof of a premium payment.

Nonprofit trade organization

Receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals

Investigative Consumer Report

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

Term Life Insurance (Temp)

Simplest to understand and cheapest to buy and has no cash value

Insurers cannot refuse coverage...

Solely on the basis of adverse information on a Medical Information Bureau

Representations

Statements made by the applicant on the insurance application that are believed to be true, but are not guaranteed to be true.

Field Underwriter

The agent who has solicited the potential insured.

Settlement Option

The choice that a policy owner can make on how their beneficiary will receive the policy proceeds.

The higher the risk...

The higher the premium

Insurable Interest

must exist at the time of the application

Privacy Rule

patients have the right to view their own medical records, as well as the right to know who has accessed those records over the previous 6 years

Insured

person covered by the insurance policy; may or may not be the policy owner

Lapse

policy termination due to nonpayment of premium

Disclosure Statement

provides basic information about the cost and coverage of the insurance being solicited

Death benefit

the amount paid upon the death of the insured in a life insurance policy

Insurer (principal)

the company who issues an insurance policy

Insurance Application

the key source underwriters use for information about the applicant

Premium

the money paid to the insurance company for the insurance policy

Policyowner

the person entitled to exercise the rights and privileges in the policy

Rating Classification

used in deciding whether or not the applicant should pay a higher or lower premium

To comply with telemarketing sales rules, telemarketers must not..

-Call any number on the National Do Not Call Registry or on that seller's do not call list -Deny someone a right to be placed on any Do Not Call Registry -Call outside permissible calling hours (before 8am and after 9pm) -Abandon calls -Fail to transmit caller ID information -Threaten or intimidate a consumer or use obscene language -Cause any telephone to ring

Do Not Call Registry Exceptions

-From or on behalf of organizations which have established a business relationship with the consumer -For which the consumer has given prior written permission -Not commercial or that do not include unsolicited advertisements -By or on behalf of tax-exempt nonprofit organizations

General Information of Application

-General questions about the applicant -also inquires about the existing policies and if the proposed insurance will replace them -identifies type of policy and amount of coverage

Paramedic Report

The insurer may only request and it is completed by a parademicor a registered nurse

Accumulation Period

The pay in a period that the annuity owner is paying into the annuity

Policy Owner

The person who owns policy, pays the premium, and chooses the beneficiary

Application

The starting point and basic source of information used by the company in the risk selection process

Insurance

The transfer of risk loss

A risk may be declined for one of the following reasons:

There is no insurable interest The applicant is medically unacceptable The potential for loss is so great it does not meet the definition of insurance; Insurance is prohibited by public policy or is illegal

Insured

This is the person whose life the policy

Attending Physician's Statement (APS)

Underwriter's request for additional info from physician

Misrepresentation

Untrue statements that could void the contract

Annutization Period

When the annuity begins to pay out payments to the annuitant

An individual who willfully violates the Fair Credit Reporting Act...

Will be subjected to a penalty up to $2,500

Insurance Policy

a contract between a policyowner and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events

Health Insurance Portability and Accountability Act (HIPAA)

a federal law that makes it easier to obtain healthcare coverage and protects personal health information

Agent/Producer

a legal representative of an insurance company; the classification of producer usually includes agents and brokers; agents are the agents of the insurer

Beneficiary

a person who receives the benefits of an insurance policy

Illustration

a presentation or depiction that includes non guaranteed elements of a policy of individual or group life insurance over a period of years

Policy Summary

a written statement describing the features and elements of the policy being issued

Solicitation of insurance

an attempt to persuade a person to buy an insurance policy, and it can be done orally or in writing

Life Insurance

coverage on human lives

Fair Credit Reporting Act

established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used

Intentional Material Misrepresentation

fraud

Adverse Selection

insuring of risks that are more prone to losses than the average risk

An individual who unknowingly violates the Fair Credit Reporting Act..

is liable in the amount equal to the loss to the consumer, as well as any reasonable attorney fees incurred in the process.