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Flashcards in Chapter 2 Life Basics Deck (68)
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a person making application for himself/herself or another to be insured under an insurance contract. The applicant may be the insured, owner or both



A document that is used to collect info provided by the applicant/insured for underwriting purposes. After the policy is issued, any unanswered questions are considered waived by the insurer.



the one or more parties named in the policy to receive the policy's benefits if the insured dies while the contract is in force.


Insurable interest

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



the individual who has the ownership rights in a policy. the policyowner and insured are usually the same, but not necessarily. Any changes made to a policy must be approved by the policyowner in writing with his/her signature.


Third-party ownership

A policy owned by a person other than the insured


Issue (original) age

insured age on the policy issue date. whole life, disability, and long term


attained age

insured age at any point in time typically sed at renewal or conversion. term and health


effective date

The date when insurance coverage begins


expiration date

The date at which insurance coverage end. term



producers are governed under the rules and regulations (referred to as unfair trade practices) with regard to what they can and cannot say when soliciting insurance.


Do not call registry

call between 8-9 their time. 31 day renewal


Sales presentation: producers are required to provide all prospective buyers the following

buyers guide: a generic brochure developed by the NAIC to assist prospective buyers of life insurance. Describes all basic types of life insurance as well as comparative costs of each are included. Deemed misrepresentation of contract

policy summary: normally a computer generated illustration detailing:
the premiums (current and guaranteed) to be paid along with current and guaranteed interest rates
The guaranteed and nonguaranteed cash value and projected dividends if any. The summary is not required to show the time value of money
The surrender values and other guaranteed data pertaining to the policy that is being shown.
The producer's name and address, along with the address of the insurance company

State law generally requires that an insurer provides prospective purchasers a copy of the buyer's guide and policy summary no later than at the time a policy is delivered


Policy replacement

any transaction in which a new life policy or annuity is to be purchased, and the producer knows or should know that existing contracts will be:
lapsed, forfeited, surrendered or terminated
reduced in value
amended with a reduction in benefit or term
reissued with a reduced cash value
subjected to borrowing



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


The producer's responsibilities include

Completing a notice regarding replacement which must be signed by the 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 replacing insurer)
Providing copies of the Notice Regarding Replacement and any sales proposals to the applicant and replacing insurer (3 working days)


The replacing insurers responsibilities include

upon receiving proper notification with the new app, the replacing insurer must notify the existing insurer of the planned replacement
Maintaining copies of the information regarding replacement for a specified period of time. 3 years for ILL



a written formal request by an applicant to an insurer requesting the insurer issue a policy based upon info contained in the application. The app is the primary source of info


Required signatures

both the producer and the applicant/insured must sign the application. The applicant is representing that statements on the app are true. If the applicant is a minor a guardian must sign the app.


Changes in the app

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.


collecting the initial premium and issuing the receipt

a producer should attempt to collect the initial premium and submit it along with the app to the insurer because the policy will not go in affect until the premium is paid


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 the policy would have been issued as applied.


Binding (unconditional receipt)

if premium is paid, coverage will begin immediately for a specific length of time regardless of whether the applicant is ultimately approved by the insurer. this may also be referred to as temporary insurance agreement. 30 days.


Acceptance (approval) conditional receipt

The coverage becomes effective at application approval. If the company doesnt approve the app, coverage was never in effect. long term


Insurers often limit the face amount of coverage provided by

a receipt usually 500,000


Trial application

a trial application is one submitted without a premium. The policy would not take effect until the policy is issued by the insurer, delivered by the agent and the premium is paid.


Disclosure at point of sale- issues relating to aids
insurers must

Avoid making or permitting unfair discrimination between individuals of the same class in the underwriting for the risks of AIDS
Require the maintenance of strict confidentiality of personal info obtained through testing and to require informed consent before testing for HIV.

Insurance companies may refuse to issue a policy to individuals based on positive HIV test results. However applicants must consent to be tested for HIV and be informed that testing for HIV may determine insurability.


Errors and Omissions
Insurance covering the liability of a producer or agency

typically written with a deductible to reduce claims frequency. Claims are filed due to client reports (complaints) and for a number of reasons


Two common complaints are

inadequacy: failing to obtain proper type or amount of coverage for a client
Negligence: quoting inflated info, misrepresenting a plan of coverage or neglecting to reveal the effect information might have on the client at a later date. The producer may be guilty of negligence whether the mistakes are intentional or unintentional.


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