Chapter 7 (Summary): Life Insurance Underwriting and Policy Issue

Flashcards covering key concepts from the chapter on Life Insurance Underwriting and Policy Issue.

Adverse selection

The tendency of higher risks to seek insurance coverage.

Insurable interest

A requirement that must exist at the time of policy inception in life insurance contracts.

Law of large numbers

A mathematical law stating that larger numbers of occurrences result in more predictable losses.

Field underwriter

The person who solicits appointments, completes applications, collects premiums, and submits applications to the home office underwriter.

Applicant

The person who requests the insurance and completes the application.

Proposed insured

The person who is requesting to be insured.

Policy owner

The person who, if the application is approved, retains all ownership rights and options of the policy.

Underwriter

The person who reviews the application for insurance.

Non-medical application

An application that requires no additional information other than the application itself.

Part I of the application

Includes general questions about the proposed insured such as name, age, and occupation.

Part II of the application

Focuses on the proposed insured's health, including questions about family health history.

Part III of the application

Contains information about the applicant's financial condition, character, and background relating to the sale.

Representations

Statements made by an applicant that are substantially true to the best of their knowledge.

Warranties

Statements that are guaranteed to be true.

Conditional receipt

A receipt that reflects a date earlier than the issue date of the policy.

Binding receipt

A type of receipt that guarantees coverage until the insurer formally rejects the application.

Medical Information Bureau (MIB)

A clearinghouse of health information supplied by insurers from applications.

USA PATRIOT Act

An act aimed at detecting and deterring terrorism.

Risk classifications

Categories of risk which include preferred risk, standard risk, and substandard risk.

Buyer's Guide

A document that all life insurance applicants must receive along with a policy summary.

Backdating a life insurance policy

The practice of using premiums based on an earlier age for the policy.