Unit 7- Policy Issuance and Delivery

Ethics

Setting a standard of conduct or behavior based on established values.

Binding/unconditional receipt

A few companies use these which makes the company liable for the risk from the date of application, regardless of the applicant's insurability. This coverage lasts for a specified amount of time (30-60 days) or until the insurer issues the policy (if earlier). If the application is rejected, coverage terminates at the end of this specified period. *Rarely used for life ins. but common for auto/homeowners' ins.

Issuing the policy

A life ins. policy may be issued as "applied for," "modified," or even "amended" provided the applicant meets the underwriting standards of the insurance company.

Professional

A person in an occupation requiring an advanced level of training, knowledge, or skill-- professionals relate well to their clients in a way that reflects well on the entire industry.

Policy summary

Addresses the specific product being presented for sale. It identifies the agent, the insurer, the policy, and each rider. It includes info about premiums, dividends, benefit amounts, cash surrender values, policy loan interest rates, and life insurance cost indexes

Buyer's Guide

An agent is required to deliver to the applicant a "Life Insurance Buyer's Guide and a Policy Summary". These docs are usually delivered before the agent accepts the applicant's initial premium. Typically the buyer's guide is a generic publication that explains life insurance in a way that avg. consumers can understand w/out addressing any specific products/policies.

Personal delivery

Best way to ensure delivery-- delivery is necessary to complete the sale of a life insurance policy.

Constructive delivery

Deemed to occur when the insurer mails a policy to its producer for actual delivery to the policy owner because the insurer has issued the policy and released it for delivery (however, it is NOT considered a legal delivery if it's mailed just for them to review and not buy).

Effective date of coverage

Important because it identifies when the coverage is effective and establishes the date when future annual premiums must be paid.

Payment less than face amount

In property or casualty insurance, the amount of claims paid is often less than the face amount of the policy. In contrast, LIFE insurance is generally paid for the full face amount of the policy.

Fiduciary

Insurance producers have a fiduciary duty to just about any person or org. that come into contact w/ in day to day business of contracting insurance. A fiduciary is a person in a position of FINANCIAL TRUST and must act on the best interest of the insured and comply with state ins. laws

Receipts

Receipts are issued once the initial premium is paid and the policy is delivered (means their coverage can now be put into effect). However, the effective date of coverage depends on the type of receipt issued.

Payment of claims for life insurance

The life ins. company should be notified asap and usually it's the producer's responsibility to make sure the company is notified of the "claim" asap. Usually there is little or no delay once the company has been given the proper forms (usually need a formal proof of death and a death certificate by the physician or coroner).

Replacement

The purchase of one life insurance policy to replace another. Also, as part of this transaction, existing life insurance or annuities will be: -lapsed, forfeited, surrendered, or terminated -converted to reduced paid-up ins., continued as extended term ins., or reduced in value by use of nonforfeiture benefits -amended to produce a reduction in the benefits or in the term for which coverage would otherwise remain in force or where benefits would be paid -reissued w/ a reduction in cash value

Conditional receipt

This receipt usually makes the coverage effective as of the date of application if the applicant is found to be insurable under their general underwriting rules. If the proposed insured dies before the policy is issued, the proceeds can either be paid to the beneficiary named in the policy if the company would have issued the policy (usually means you have to be someone w/ a standard risk/loss OR the proceeds will not be paid if the company would NOT have issued the policy (i.e. someone who is considered a sub-standard risk and would have needed to pay additional premiums-- instead, only the premium will be returned).

Temporary insurance agreement

This type of receipt/agreement provides the applicant w/ immediate life insurance coverage whether or not the individual is found to be insurable while the underwriting process is taking place. The insurer has the right to cancel this coverage if the applicant fails to meet their normal underwriting standards and claims incurred during this underwriting period must be paid whether or not it would have been approved.

Policies considered effective when:

-the policy is delivered to the applicant -the first premium is paid -a Statement of Good Health is obtained

3 exceptions to getting the face amount

1. When there is an outstanding loan against the cash value of a policy (then it is deducted from the amount the beneficiary would get) 2. When a premium payment is due (deducted as well if the insured dies during the grace period after they pay a month's deductible) 3. When there is an error made in determining the age or gender of the insured when the policy was issued (then the ins. company would have to compute the amount the premium would have covered if the correct info had been given and then pays that amount to the beneficiary.

Inspection receipt

Happens when the proposed insured wants to examine the policy carefully before actually purchasing it and in this situation, the policyowner does not pay the first full premium at the time of the application. The policyowner signs and inspection receipt for the policy, examines it, and then pays the full first premium.

Mailing the policy

Legally, the policy is considered delivered when it is mailed OR turned over to the policy owner or someone acting on the policy owner's behalf.

Amendments

The insurer may amend the policy's terms depending on the results of the underwriting process. The applicant does not have to accept the amended policy and may withdraw their application.

Statement of good health

When the initial premium is not paid until the policy is delivered, the agent must also obtain a statement signed by the insured attesting to their continued good health before leaving the policy w/ them.