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Underwriting

The process of evaluating an applicant’s risk to determine whether coverage should be issued and at what premium.

Field Underwriting

Risk information gathered by the agent during the application process.

Inspection Report

A report evaluating an applicant’s character, lifestyle, and financial condition.

Medical Information Bureau (MIB)

An organization that provides insurers with information about applicants’ medical histories.

Risk Classification

The process of placing applicants into risk categories.

Preferred Risk

An applicant with lower-than-average risk who receives lower premiums.

Standard Risk

An applicant with average risk who pays standard premiums.

Substandard Risk

An applicant with higher-than-average risk who pays higher premiums.

Declined Risk

An applicant considered too risky to insure.

Fiduciary Responsibility

The duty to act in the best interests of the client.

Material Misrepresentation

A false statement that would affect an insurer’s decision to issue coverage.

Constructive Delivery

Legal delivery of a policy when it is given to the agent for delivery to the insured.

Agent’s Report

Information provided by the agent regarding the applicant and observations made during the application process.

Application

The primary source of underwriting information completed by the applicant and agent.

Proposed Insured

The person whose life or health is being insured.

Statement of Continued Good Health

A statement signed by the applicant confirming no significant health changes occurred after application and before policy delivery.

Backdating

Assigning an earlier effective date to a policy, usually to obtain a lower age classification.

Conditional Receipt

Coverage becomes effective only if underwriting requirements are satisfied.

Binding Receipt

Provides temporary insurance coverage immediately while underwriting is completed. Most common in Property & Casualty insurance.

Beneficiary

The person designated to receive policy proceeds upon the insured’s death.

Primary Beneficiary

The first person entitled to receive policy proceeds.

Contingent Beneficiary

Receives policy proceeds if the primary beneficiary dies before the insured.

Uniform Simultaneous Death Act

Assumes the beneficiary died first when it cannot be determined who died first.

Facility of Payment Clause

Allows the insurer to pay benefits to a person who incurred the insured’s final expenses.

Fixed Amount Option

The beneficiary chooses the amount of each payment.

Fixed Period Option

The beneficiary chooses how long payments will be made.

Life Income Option

Provides payments for the beneficiary’s lifetime.

Straight Life Income

Provides income for life and stops at the beneficiary’s death.

Period Certain

Guarantees payments for a specified period even if the beneficiary dies.

Joint and Survivor

Provides income until both beneficiaries have died.

Refund Life

Returns any remaining principal if the beneficiary dies before receiving the full value.

Tax-Deferred Growth

Earnings grow without current taxation until withdrawn.

Cash Value

The savings component of permanent life insurance.

1035 Exchange

Allows replacement of one life insurance policy with another without immediate tax consequences.

Net Premium

Mortality cost minus anticipated interest earnings.

Gross Premium

Net premium plus expenses and insurer profit.

HIPAA

Health Insurance Portability and Accountability Act; protects medical privacy.

Free-Look Period

A period allowing the policyowner to review and return a policy for a full refund.

Mail-Order Free-Look

Usually 30 days.

Are life insurance premiums tax-deductible?

No

Is cash value growth tax-deferred?

Yes

Is the death benefit generally income tax-free?

Yes

Can a 1035 exchange avoid immediate taxation?

Yes