Chapter 2

Question 1

Applicant

Answer 1

A person making application for him or herself or another to be insured under an insurance contract

The applicant may be the insured, the owner or both

Question 2

Application

Answer 2

A written formal request by an advocate to an insurer, requesting the insurer issue a policy based upon information contain in the application

It is the primary source of information used for underwriting purposes

Question 3

Beneficiary

Answer 3

One or more parties named in the policy to receive the policy, proceeds, or death, benefits, if the insured dies while the contract is in force.

Question 4

Insurable interest

Answer 4

The relationship that must exist between the applicant and insured, at the time of application and policy insurance, in order for the contract to be valid.

Individuals have an unlimited insurable interest in themselves.

Examples of insurable interest include a policy, purchased by spouse or immediate family member, business partner, or creditor of the insured.

Question 5

Policy owner

Answer 5

The individual who has ownership rights in a policy.

The policy owner and insured are usually the same, but not necessarily.

Any changes made to a policy must be approved by the policy, owner and writing with their signature

Question 6

Third-party ownership

Answer 6

A policy owned by a person other than the insured

Question 7

Issue (original) age

Answer 7

Insured age on the policy issue date

Question 8

Attained age

Answer 8

Insured age at any point in time, typically used at renewal or conversion

Question 9

Effective date

Answer 9

The date when insurance coverage begins

Question 10

Expiration date

Answer 10

The date when insurance coverage ends

Question 11

Solicitation

Answer 11

the act of asking for or trying to obtain something from someone.

Question 12

Effective date

Answer 12

Insurance coverage begins

Question 13

Expiration date

Answer 13

Insurance coverage ends

Question 14

Advertising

Answer 14

Producers, our governor under the rules and regulations : UNFAIR trade practices

What they can, and cannot use or say when soliciting insurance

Question 15

Do not call registry

Answer 15

The federal trade commission amended the telemarketing sales rule prohibited under the TCPA: telephone consumer protection act

For most telemarketers or sellers to call number listed on the National do not call registry that they must update their list at least once every 31 days before 8 AM after 9 PM, our prohibited

Question 16

Sales presentation

Answer 16

Producers are required to provide all prospective buyers

Question 17

SALES presentation/producer responsibilities

Answer 17

Buyers guide
Policy summary

Question 18

Buyers guide

Answer 18

A generic brochure developed it by the NAIC to assist, prospective buyers of life insurance

Descriptions of all basic types and comparative costs

Question 19

Policy summary/illustration

Answer 19

The premiums with current and guaranteed interest rates

The guaranteed and non-guarantee, cash value and projected dividends, if any – summary is not required to show the time value of money

The surrender values and other guaranteed data pertaining to the policy

The producers name address, along with the address of the insurance company

Question 20

Requirement by the NAIC

Answer 20

Instructs insurers to provide prospective purchasers, a copy of the buyers guide and policy summary before accepting a premium payment or deposit, or no later than policy delivery if the policy has a free look. Of at least 10 days.

Question 21

Policy replacement

Replacement

Answer 21

Any transaction in which a new life policy or annuity is to be purchased, and the producer knows, or should know, that existing contract will be

Lapsed, forfeited, surrendered or terminated
Reduce and value
Amended with a reduction and benefit or term
Re-issued with a reduced cash value
Subjected to borrowing

Question 22

Replacing insurer

Answer 22

The insurer responsible for issuing the new policy

Question 23

Existing insurer

Answer 23

The insurer who issued the policy to be replaced

Question 24

Conservation

Answer 24

The act of saving or keeping the existing policy and preventing it from being replaced

Question 25

The producers responsibilities include

Answer 25

Completing a notice regarding replacement signed by applicant and producer Obtain information regarding any existing policies, including the names of the existing insurers and policy numbers this must be provided to the rep replacing insurer Providing copies of the notice regarding replacement and any sales proposals to the applicant and replacing insurer

Question 26

The replacing insurers responsibilities include

Answer 26

Upon receiving proper notifications with the new application, the replacing insurer must notify the existing insurer of the plant replacement Maintaining copies of the information regarding replacement for a specified period of time C state insurance chapter for additional state specify information

Question 27

Completing the application and field underwriting

Answer 27

It’s a written formal request by the applicant to the insurer like quoting The application is the primary source of information for an insurer underwriting a potential risk In fact, a copy of the application if attached to the policy becomes a part of the entire contract

Question 28

Required signatures

Answer 28

Both the producer and the applicant/insured must sign the application if applicant is a minor a guardian must sign the application

Question 29

Changes in the application

Answer 29

Whenever an answer to a question needs to be corrected, The applicant or producer makes the correction and the applicant initials the change, or the producer can complete a new application

Question 30

Consequences of incomplete applications

Answer 30

It is the producers responsibility to make certain the application is filled out completely, correctly, and to the best of the applicant knowledge The underwriter will return an incomplete application to the producer for completion of the applicant

Question 31

Collecting the initial premium and is issuing the receipt

Answer 31

A producer should attempt to collect the initial premium is submit it along with application to the insurer, because the policy would not go into effect until the first premium has been paid Usually 10 days grace period

Question 32

The types of receipts that can be issued when the premium is submitted with the application are

Answer 32

Conditional receipt – if premium is paid, coverage will be in effect the date of application or completion of the medical exam, whichever is later as long as a policy would have been issued as applied for

Question 33

Binding( unconditional) receipt

Answer 33

The coverage becomes effective at application approval. If the company doesn’t approve the application, coverage was never in effect.

Question 34

Trial application

Answer 34

Submitted without a premium. The policy would not take affect until the policy is issued by the insurer, delivered by the agent in the premium is paid

Question 35

Notice of the information practices and disclosure – fair credit reporting act

Answer 35

The insurance company must meet requirements under the FCRA when gathering information from a third-party to use during underwriting. The app must be notified and give consent for information to be received by third-party. If the insurer declines coverage, the advocate will have the right to obtain a copy of all reports from the reporting agency. This is referred to as a post application consumer review.

Question 36

Disclosure at point of sale – issues relating to AIDS

Answer 36

Insurers must Avoid making or permitting unfair, discrimination between individuals of the same class in the underwriting for the risk of AIDS Require the maintenance of strict, confidentiality of personal information obtained through testing and to require informed consent before testing for HIV

Question 37

Insurance companies may refuse to issue a policy to individuals based on positive HIV test results

Answer 37

However, applicant must consent to be tested for HIV and to be informed that testing for HIV may determine insurability

Question 38

Errors and omissions

Answer 38

Insurance covering the liability of a producer or agency, typically written with a deductible to produce claims frequency. Claims are file due to clients reports complaints and for a number of reasons

Question 39

Two common complaints are

Answer 39

Inadequacy – failing to obtain proper type or amount of coverage for a client Negligence– quoting inflated information, misrepresenting a plan of coverage, or neglecting to review the effect information might have on the client as a later date The producer may be guilty of negligence, whether the mistakes are intentional or unintentional

Question 40

Individual underwriting by the insurer

Answer 40

Underwriting is the process of selection, classification, and rating: Determining if someone is insurable, classifying the risk, and determining the rate or premium to be charged

Question 41

The sources of underwriting include

Answer 41

Application Medical exams Attending physicals statement, a.k.a. APS Medical information bureau MIB Inspection report Agent report

Question 42

Information sources and regulation The application consist of two parts

Answer 42

Part one: contains general questions about the applicant, such as sex/gender, marital status, residence, date of birth, occupation, and past and present life insurance Part two : contains questions pertaining to medical background, past and present health, any medical visits, hospitalizations, or surgeries in a recent years, medical status of immediate family members, including their ages and causes of death

Question 43

Medical examinations

Answer 43

Are conducted by physicians or nurses who provide results of an examination and information regarding the applicant present health It is more frequently requested due to the higher amounts of insurance applied for a coupled with the high degree of cardiovascular concerns, high cholesterol, and enzyme levels, as well as the prevalence of the HIV virus Medical exams are at the insurers expense The results of the medical examination is the only report that may be copied and part of the policy .

Question 44

Attending physician statement, a.k.a. APS

Answer 44

And use in cases in which the individual application and/or medical reports revealed conditions of which more information is required

Question 45

Medical information viewer a.k.a. MIB

Answer 45

Is to collect adverse medical information about an applicant health support by the insurance companies, and act as an information exchange they are member owned cooperation that operates on a not-for-profit basis General basis – MIB cannot solely be used to decline an applicant for insurance because of the general information General medical information and other conditions, typically hazards, hobbies, and adverse driving records General information basis includes a life, health, disability, income, critical illness, and long-term care, insurance, policies, fraud, arrows, omissions, or misrepresentations,

Question 46

Inspection report

Answer 46

A general report of the applicants, finances, character, morals, work, hobbies, and other habits Sometimes refer to as a Consumer investigative report

Question 47

Agents report

Answer 47

A personal statement submitted by the producer to the insurer regarding the applicant financial condition, any personal knowledge of the applicant.

Question 48

Individual selection criteria

Answer 48

The insurer uses information collected by the field underwriter and other sources to determine the insurability of an individual Ultimately, the home office underwriter’s responsibility to determine if an individual meets the underwriting requirement

Question 49

Non-medical application

Answer 49

An application used when a policy requested does not Require a medical examination for underwriting

Question 50

Non-medical application

Answer 50

An application used when a policy requested does not Require a medical examination for underwriting

Question 51

Classification of risks Rating applicants

Answer 51

Upon receipt of the information, such as the application, medical exam, blood, and urine test results. Underwriter analyze the information and determine if the applicant is an acceptable risk If acceptable, underwriters, then determine the classification to be used in the calculation of the premium

Question 52

Standard risks

Answer 52

Individuals who have the same health, habits, sex – gender/and occupational characteristics as those reflected in the mortality table. Individuals in this category have an average life expectancy.

Question 53

Preferred risks

Answer 53

Individuals who meet certain requirements and qualify for lower premiums because of ideal health, height, and weight. Individuals in this category have a longer than average life expectancy.

Question 54

Substandard risks: higher risk exposure

Answer 54

Individuals who are not acceptable at standard rates because of poor health, bad habits or occupational hazards. Individuals in this category are issued “ rated policies” known as surcharges Graded lien plan Rate it up, age Flat rate Tubular rate

Question 55

Graded LIEN plan

Answer 55

Only the premium would be refunded in case of death. The death benefits increases overtime with a full face amount eventually payable. Generally speaking used with senior life insurance plans to provide minimal benefits without a medical examination

Question 56

Rated up age

Answer 56

Rates and insured at older than actual age

Question 57

Flat rate

Answer 57

A constant dollar amount added to the standard rate per 1000 of coverage Example : a student pilot or someone who has a hazardous hobby would be flat rated If the standard premium is $25 annually for 1000 of insurance, with a flat rate of five dollars/1000 added to the standard premium, the new total premium per 1000 is now $30

Question 58

Declined

Answer 58

This is not a reading classification, but a decision that the risk is one for which the insurer refuses to issue insurance.