Unit 2 Vocab and Core Content

When a mistake is made on an application and a correction needs to be made, what needs to be done?

The correction needs to be made and the applicant must initial next to the correction.

What is back dating, and what is the benefit of it for creating policies

Backdating is assuming a previous time to be true and taking it into consideration when creating policies. The benefit of backdating is it can allow for lower premiums

Backdating can be done up to how many months?

6 months

Who must sign the producer report?

Only the producer

After a premium is given, the producer must give a what?

A receipt

What are the three parts to an application?

General information, health information, and producers report

When underwriting for life insurance companies, what are the four different classifications of risks

Standard risk, preferred risks, substandard risks, and declined

When it comes to insurance, what are the four things that there cannot be any discrimination on

Race, religion, national origin, place of residence

When is the effective date of coverage for normal circumstances? When is the effective date of coverage for substandard risks?

The effective date of coverage for normal risks is the date of application or the date of the medical exam. For substandard risks the effective date of coverage is the day the policy is delivered to them

When must the notice to applicant be given?

No later than 3 days after the report was requested

What is the max penalty for getting consumer info reports under false pretenses?

A fine of $5,000, imprisonment for a year, or both

Violators of the Fair credit reporting act may be subject to what?

Fines and imprisonment, paying any damages suffered by the consumer, punitive damages reported by the court, any reasonable attorney fees

What does STOLI stand for? What does IOLI stand for?

STOLI: stranger owned life insurance

IOLI: investor owned life insurance

What is STOLI/IOLI:

When an investor persuades a senior to put in a new life insurance policy with the investor as a beneficiary in return the investor will offer the senior loan money to pay premiums, and upfront payment, or small continuing interest in the policy death benefit.

What is the overall purpose of the USA Patriot act?

To deter terrorist activity

An insurance anti-money laundering program must be headed by a what?

A compliance officer responsible for implementing the program

Define Underwriting

The process of evaluating a risk to determine if it is acceptable based on established insurance company guidelines

What is Producer another word for?

Another term for agent 

Define Offer to Buy

When the premium is submitted with the life insurance application 

Define Binding receipt/binding

Receipt that is effective for 30-60 days  from the date of application even if the applicant is found to be uninsurable. Life insurance binders are called temporary insurance agreements 

Define HIPPA (Health Insurance Portability and Accountability Act)

Specific rules on the disclosure of insured's health information by medical providers, agents, and insurance companies

Define Medical Information Bureau (MIB)

An insurance trade association (hub) that has a giant archive of underwriting information from previous applicants. Insurance companies that are members of this association can come to this giant library to research if they want to insure an individual

Define Consumer Report

Used to determine person's eligibility for personal credit (credit report), insurance, or for employment. This can only be disclosed to someone that has business legitimate need for it.

Define Investigative Consumer Reports/Inspection Reports

Reports containing information collected from the applicants associates, friends, relatives or neighbors.  

What is a Notice to applicant? What types of insurance does it mainly pertain to?

Informs applicant that a report will be ordered concerning their past credit history and any other life or health insurance for which they have previously applied. This is required to be delivered to applicant for life/health insurance. This is to be delivered with a receipt 

Define the Employee Retirement Income Security Act (ERISA)

act that protects the interests of participants in employee benefit plans as well as the interests of the participants' beneficiaries. Mostly used in pension plans but applies to some insurance plans as well