Accident and Health Insurance Basics

Policy Review

When delivering the policy, the agent should review the insured's original goals and needs. The policy should also be thoroughly reviewed with the insured.

critical illnes

covers multiple illnesses, such as heart attack, stroke, renal failure, and pays a lump-sum benefit to the insured upon the diagnosis (and survival) of any of the illnesses covered by the policy. The policy usually specified a minimum number of days the insured must survive after the illness was first diagnosed.

advertisement standards

ensure truthful and adequate disclosure of relevant information to the consumer, and to prevent unfair competition among insurers. Includes any printed or published material, descriptive literature and sales aids, prepared sales talks and presentations, and material included with a policy.

Accidental bodily injury

an unforeseen and unintended injury that resulted from an accident rather than a sickness.

Common Exclusions from Coverage

-War or act of war injuries or sicknesses; -Intentionally self-inflicted injuries; -Elective cosmetic surgery; however, if treatment is required to correct a condition due to an accident or a birth defect, or is medically necessary, then coverage may be available; -Experimental/investigation procedures; -Conditions covered by workers compensation; -Government plans: ; -Participation in criminal activity: -Injuries resulting from drug or alcohol intoxication (unless administered by a physician).

Medical Expense

A medical expense contract covers many of the expenses one incurs from an accident or sickness, such as a physician or hospital expense. Expenses may be paid directly to the insured, and the insured would be responsible for paying the medical expenses. This type of benefit payment is called reimbursement. If expenses are paid on a scheduled basis, the insurance company will refer to a list determining the cost of the treatment, and it will only pay to a certain amount. If a person were covered as a dependent under their spouse's group insurance, payment of medical expenses would be coordinated.

Accidental Death and Dismemberment (AD&D)

Accidental Death and Dismemberment coverage only pays for accidental losses and is thus considered a pure form of accident insurance. It provides for the payment of a lump sum benefit, in the event that the insured dies from an accident as defined in the policy, or in the event of loss of certain body parts caused by an accident. The policy will usually pay the full principal for the loss of sight in both eyes, or two or more limbs; however, it may only pay 50% for the loss of one hand or one foot. In addition, some policies will pay double or triple indemnity, meaning the policy will pay twice or three times the face amount in the event of accidental death. Most policies will pay the accidental death benefit as long as the death is caused by the accident and occurs within 90 days.

Sales Presentations

Accurate and complete. Include any and all promotional materials, policy applications, replacement forms, outline of coverage and any other forms or information used in connection with solicitation or sale of accident and health insurance.

Premium Collection

All premiums, return premiums, or other funds received by an agent must be kept in a fiduciary capacity. An agent must, in the regular course of business, account for and pay these funds when due to the insurer, insured, or the insured's assignee. All funds received by an agent must be kept in a fiduciary account which is separate from all other business and personal funds. Funds deposited into the separate fiduciary account must not be commingled or combined with other funds except for the purpose of advancing premiums.

Policy Delivery

Although policy delivery may be accomplished without physically delivering it in the policyowner's possession, an agent should personally deliver policies whenever possible. Once the delivery of a policy is made, the free-look period begins.

Application Procedures

An application for insurance begins with a form provided by the company and completed by the agent as questions are asked of the applicant, and the applicant's responses are recorded. This form - often called the "app" - is then submitted to the insurance company for its approval or rejection. The application is the applicant's written request to the insurance company to issue a policy or contract based upon the information contained in the application.

Disclosure of Information about Individuals

An insurance company or an agent cannot disclose any personal or privileged information about an individual unless any of the following occurs: -A written authorization by the individual dated and signed within the past 12 months has been provided; -The information is being provided to all of the following: -An insurance regulatory authority or law enforcement agency, pursuant to the law; An affiliate for an audit, but no further disclosure is to be made; -A group policyholder for the purpose of reporting claims experience; -To an insurance company or self-insured plan for coordination of benefits; -A lien holder, mortgagee, assignee or other persons having a legal or beneficial interest in a policy of insurance.

Investigative Consumer (Inspection) Report

An investigative consumer report includes information on an applicant's character, general reputation, personal habits, and mode of living that is obtained through investigation. For example, this report could include interviews with associates, friends, and neighbors of the applicant. Such reports may not be performed unless the applicant is clearly and accurately informed of the report in writing. The consumer report notification is usually part of the application. At the time that the application is completed, the agent will separate the notification and give it to the applicant.

Common Situations for Errors and Omissions

At any time during the sales process there can be a misunderstanding or misrepresentation that could lead to legal action being taken by the insured. Agents should document everything: interviews, phone conversations, requests for information, etc. The sales interview and the policy delivery are the most common occasions for errors and omissions (E&O) situations to occur that may result in providing inadequate coverage or failure to maintain and service coverage.

Changes in the Application

Because the application is so important, most companies require that it be filled out in ink. The agent might make a mistake when filling out the app or the applicant might answer a question incorrectly and want to change it. There are two ways to correct an application. The first and best is to simply start over with a fresh application. If that is not practical, draw a line through the incorrect answer and insert the correct one. The applicant must initial the correct answer.

entire contract

If the policy is issued, a copy of this application is stapled in the back of the policy.

Attending Physician Statement

If the underwriter deems it necessary, an attending physician's statement (APS) will be sent to the applicant's doctor to be completed. This source of information is best for accurate information on the applicant's medical history. The physician can explain exactly what the applicant was treated for, the treatment required, the length of treatment and recovery, and the prognosis.

capital sum

In case of loss of sight or accidental dismemberment, a percentage of that principal sum will be paid by the policy.

field underwriting

In health insurance, far more important than in life insurance

Statement of Good Health

In many cases, the initial premium is not paid until the policy is delivered. Most insurance companies require that when the agent collects the premium, he or she must also obtain a statement signed by the insured testifying to his/her continued good health.

Specified (Dread) Disease

Limited risk, policy provides a variety of benefits for a specific disease such as cancer policy or heart disease policy. Benefits are usually paid as a scheduled, fixed-dollar amount of indemnity for specified events or medical procedures, such as hospital confinement or chemotherapy.

Loss of Income from Disability

Loss of income caused by accident and/or sickness causing an insured the inability to work and earn income is covered under disability income policies or coverages. Disability income insurance is a valued contract or stated amount that pays weekly or monthly benefits due to an injury or sickness. Benefits may be determined by the insured's past earnings and may be limited to a percentage of that income.

outline of coverage

Must be delivered at the time of application or upon delivery of the policy. With direct response sales, however, the insurer does not have an opportunity to provide the outline of coverage at the time of application, so it is not required. The purpose of the outline of coverage provision is to provide full and fair disclosure to the applicant.

Producer Report

Only the agent/producer is involved in completing the agent's (producer's) report. It asks questions about the length of time that the applicant has been known to the agent, an estimate of the applicant's income and net worth and whether the agent knows of any reason that the contract should not be issued. The agent's statement does not become part of the entire contract.

Delivery Receipt

Policy proof of delivery is required by obtaining the owners/insured signature on a delivery receipt which is mailed to the home office

Medical Information Bureau (MIB)

Reports on previous insurance information can be obtained from the Medical Information Bureau (MIB). Members of MIB can request a report on an applicant and receive coded information from any other applications for insurance submitted to other MIB members. MIB information cannot be used in and of itself to decline a risk, but it can give the underwriter important additional information.

Dental

Routine and preventive maintenance is covered up to an annual maximum without a deductible or copayment. This coverage benefit usually includes routine examinations and teeth cleaning once a year, and perhaps full-mouth X-ray once every 3 years. (The absence of a deductible and copayment is intended to encourage preventive maintenance.) Routine and major restorative care includes such as treatment of cavities, oral surgery, bridges and dentures. These procedures are covered up to a specific maximum, subject to an annual deductible per insured family member and a coinsurance. Orthodontic care, if included, will have a separate maximum and a separate deductible, which may differ from the deductible for restorative care.

Company Underwriting

The underwriter's function is to select risks, which are acceptable to the insurance company. The selection criteria used in this process, by law, must be only those items that are based on sound actuarial principles or expected experience. The underwriter cannot decline a risk based on blindness or deafness, genetic characteristics, marital status, or sexual orientation. When underwriting health insurance policies, the prime considerations are age, gender, occupation, physical condition, avocations, moral and morale hazards, and financial status of the applicant.

principal sum

This amount is usually equal the amount of coverage under the insurance contract, or the face amount.

Effective Date of Coverage

Under the terms of the insurability conditional receipt, the insurance coverage becomes effective as of the date of the receipt, provided the application is approved. This receipt is generally provided to the applicant when the initial premium is paid at the time of application.

Start date

Under the terms of the insurability conditional receipt, the insurance coverage becomes effective as of the date of the receipt, provided the application is approved. This receipt is generally provided to the applicant when the initial premium is paid at the time of application.

Dental Expense

insurance is a form of medical expense health insurance that covers the treatment, care and prevention of dental disease and injury to the insured's teeth. An important feature of a dental insurance plan which is typically not found in a medical expense insurance plan is the inclusion of diagnostic and preventive care (teeth cleaning, fluoride treatment, etc.). Some dental plans require periodic examinations as a condition for continued coverage.

Sickmess

normally defined as an illness, which first manifests itself while the policy is in force. Majority of health insurance claims.

Accident-only

policies are limited policies that provide coverage for death, dismemberment, disability or hospital and medical care resulting from an accident. Because it is a limited medical expense policy, it will only pay for losses resulting from accidents and not sickness.

hospital indemnity

policy provides a specific amount on a daily, weekly or monthly basis while the insured is confined to a hospital. Payment under this type of policy is unrelated to the medical expense incurred, but based only on the number of days confined in a hospital. This can also be called a hospital fixed-rate policy.

Long-term Care Expense

provide benefits for medically necessary services which one receives in a nursing home or perhaps in one's own home (home health care), but not care received in an acute care unit of a hospital.

travel accident policy

provides coverage for death or injury resulting from accidents occurring while a fare-paying passenger is on a common carrier. The benefits are only paid if the loss occurs during the time of travel.

Substandard

risks are those that reflect an increased risk of loss. These applicants may be able to obtain health insurance coverage but at an increased premium. An applicant could be rated substandard for a poor health history or a dangerous vocation or avocation.

Preferred

risks reflect a reduced risk of loss and are covered at a reduced rate. Nonsmokers would be an example of preferred risks.

Standard

risks reflect average exposures and may be insured at standard rates and premiums.

Underwriting

the first step in the total process of insuring health risks. Minimize the problem of adverse selection. Adverse selection involves the fact that those most likely to have claims are those who are most likely to seek insurance.