LI Application/underwriting Retirement

Required Signatures

Signatures necessary for the applications validity. May include beneficiaries or withness.

Change in the Application

Process of making alterations to the application. Require initialing or signing by the applicant/agent to confirm accuracy.

Consequences of incomplete applications

Outcome of missing/inaccurate information. May delay underwriting, lead policy denial, or affect coverage terms and premiums.

Warranties and representations

Statements made by the applicant regarding their health, lifestyle, and other factors. Insurers rely on these statements to assess risk and determine policy terms.

Collecting the initial premium and issuing the receipt

Process of receiving the first premium payment and providing confirmation. Receipt serves as proof of payment.

Replacement

Substituting an existing policy with a new one. Requires careful consideration of the benefits, costs, and potential consequences.

Disclosures at point of sale

Providing relevant information to applicants before policy purchase. Ensures applicants are informed about their rights, privacy, and consent requirements.

US Patriot Act

Compliance with regulations to prevent money laundering and terrorism financing. Requires Verification of identity and reporting suspicious activities.

Gramm-Leach-Bliley Act (GLBA) privacy

Protection of consumers’ personal financial information. Requires financial institutions to provide privacy notices and safeguard sensitive data.

Insurable Interest

Legal Requirement for the policyholder to have a financial interest in the insured’s life. Ensures policies assure not taken out of speculative purposes and protects against fraud.

Medical Information and consumer reports

Gathering data on the applicant’s health and financial history. Used to assess risk and determine premium rates and coverage eligibility.

Fair Credit Reporting Act

Federal Law regulating the collection and use of consumer credit information. Requires accuracy, fairness, and privacy in the handling of credit reports.

Risk Classification

Process of categorizing applicants based on risk factors. Determines premiums rates and eligibility for coverage.

Stranger/Investor-owned life insurance (STOLI/IOLI)

Arrangement where investors purchase life insurance policies with the intention of profiting from the insured’s death. Controversial practice often involving strangers w/out insurable interest and can lead to legal and ethical issues.

Consideration

Something of value exchange between parties. Essential for a valid contract'; Can be money, goods, or services.

Offer and Acceptance

Clear expression of willingness to enter a contract (offer) and agreement to its terms (Acceptance) Forms basis of mutual assent, a fundamental principle of contract law.

Complete Parties

Parties capable of understanding and entering into a contract. Includes mental capacity, legal age, and absence of undue influence or duress.

Legal Purpose

Contract must serve a lawful objective. Contracts for illegal activities or against public policy are unenforceable.

Conditional

Performance depends on the occurrence of a specific event (death, disability) Insurer’s obligation to pay benefits is triggered by the policy’s conditions being met.

Unilateral

One-sided contract where only the insurer makes a legally enforceable promise. Policyholder pays premium but insurer is only obligated to pay benefits if a covered loss occurs.

Adhesion

Standardized contract with terms set by the insurer, typically non-negotiable. Policyholder adheres to the terms offered by the insurer without much opportunity for modification.

Aleatory

Unequal exchange of value where the outcome depends on an uncertain event. Premiums paid by the insured may be small compared to the potential benefits received, which are contingent on future events such as death or disablity.

Conversion Privilege

Right granted to policyholders to convert a group or term life insurance policy to a permanent policy without evidence of insurability. Typically exercised when group coverage ends or an individual wants to secure lifelong protection.

Contributory

Group insurance plan where employees contribute to the premium cost. Premiums are shared between the employer and employees, often through payroll deductions.

Noncontributory

Group insurance where the employer covers the entire premium cost. Employees do not contribute to the premium and coverage is provided at not cost to them.

Qualified Plans

Retirement plans meeting IRS requirements for favorable tax treatment. Contributions are tax deductible, and earnings grow tax-deferred until withdrawal.

Non qualified plans

Retirement or executive benefit plans that do not meet IRS requirements for tax advantages. Contributions are made with after-tax dollars, but earnings may still grow tax-deferred until withdrawal.

Personal Insurance needs

Insurance coverage designed to protect individuals and their families from financial loss. Includes life insurance, health insurance, disability insurance, and property and casualty insurance.

Business Insurance needs

Key person and Buy-Sell

Key Person

Insurance coverage to protect a business against financial loss due to the death or disability of a key employee. Provides funds to cover recruitment costs, loss of revenue, or debt repayment.

Buy-Sell

Insurance used to fund a buy-sell agreement between business owners. Ensures continuity of the business by providing funds for the purchase of a deceased or departing owner’s share.

Individual Life

Life insurance policies purchased by individuals to provide financial protection for themselves and their beneficiaries. Can vary in coverage amount, premium, duration.

Group Life

Life insurance coverage provided to a group of people, usually employees of a company or members of an organization. Employee benefit package, with coverage amount based on salary or a flat amount.

Mortified Endowment Contracts (MECs)

Life Insurance policies that fail to me IRS guidelines regarding premium payments. Tax treatment differs from traditional life insurance policies; withdrawals are subject to income and tax and potentially a 10% penalty.