Life: Chapter 5 – Flashcards
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Preferred risk policies with reduced premiums are issued by insurance companies because the insured has what?
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Better than average mortality or morbidity experience.
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Upon policy delivery, which of the following must a producer have an applicant sign if no initial premium was collected with the life insurance application?
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A good health statement
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What would be a valid reason why a policy premium would be higher than the standard premium?
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The insured does not meet established underwriting requirements.
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What is the purpose of the Medical Information Bureau (MIB)?
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To help underwriters evaluate risk.
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Statements made by an insurance applicant on an application are considered to be what?
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Representations
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Describe the three basic parts of an application.
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1) General: general questions including name, age, address, birthday, sex, income, marital status, and occupation.
2)Medical: health and health history of proposed insured and their family.
3)Agent's report: Additional information bout the applicant's financial condition, character, background and purpose of sale, and how long the agent has known the applicant.
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A person who is a nonsmoker, of average weight, and in excellent health would most likely be in which risk classification?
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Preferred.
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What is considered to be a document that describes the critical segments of a life insurance policy?
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Policy summary
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When does a life insurance policy typically become effective?
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When initial premium is collected and policy is issued.
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When does insurable interest need to exist?
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Only at the time of policy inception.
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In what relationships does insurable interest exist?
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-applicant's own life
-in a spouse
-parents in their children
-children in parent/grandparent
-business in lives of officers, directors, key employees
-business partners in eachother
-creditor to debtor (to extent of the debt)
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What is the USA Patriot Act?
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An act requiring insurance companies to establish formal anti-money laundering programs.
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What does a life insurance policy summary normally include?
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The policy's cash value.
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What would happen if a life insurance applicant is given a conditional receipt from an insurance agent and then dies the next day?
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Claim will be paid if application is approved.
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An applicant intentionally lying to an insurance company on an application in order to obtain a cheaper premium is an example of what?
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Fraud
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What does a change in an insurance application require?
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An initial made by the applicant.
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Fair Credit Reporting Act of 1970
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Enacted by congress in 1970 which establishes procedures for collection and disclosure of obtained information and to ensure fairness with regards to confidentiality, accuracy, and disclosure.
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What is required to complete an application?
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Signature of applicant, agent, authorizing investigative consumer reports or medical information.
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When is a policy valid?
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With payment of initial premium.
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What is a "conditional receipt"?
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Most common; When applicant pays initial premium, coverage is effective on the condition that applicant proves to be insurable either on date of signature or date of medical exam.
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What is a "binding receipt"?
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Coverage is guaranteed until insurer formally rejects application, even if proposed insured is ultimately found to be uninsurable.
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What is the purpose of backdating?
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To use premiums based on an earlier age, making them lower.
