Unit 2 Life and Health

Changes in the Application

Must be initialed by the applicant

Backdating

Usually no more than 6 months

Required Signatures

Insured, Producer/agent, and Applicant (if not the insured)

Producer's Report

Completed by the producer/agent; not attached to policy if issued

Conditional Receipt

Given when premium is paid with application; coverage starts at the later of application signing or medical exam, if standard/preferred risk

Binding Receipt

Temporary coverage; not common in life insurance

Application (underwriting)

Primary source of underwriting information

Attending Physician Statement (APS)

A source of underwriting information from the applicant's doctor

AIDS testing

Cannot ask about sexual orientation, not based on geographic location, requires written consent

Medical Information Bureau (MIB)

Cannot be the sole reason for denial; insured must be informed; gets info from insurance companies

Consumer reports

Insured must be informed

Investigative reports

Insured must give consent

Standard risk

A risk classification for an average applicant

Preferred risk

A risk classification for a better-than-average applicant

Substandard risk

A risk classification for a higher-than-average risk applicant

Declined risk

A risk classification where coverage is refused

Agent Delivery

Usually requires a signed delivery receipt

Statement of Good Health

Required if no premium was submitted with the application; if health has changed, agent can't deliver the policy

Effective Date of Coverage

Depends on conditional receipt terms, substandard rating, or premium payment at delivery

Fair Credit Reporting Act

Requires notice to applicant about third-party information; consumers can dispute; penalties up to $5,000 fine and/or 1 year imprisonment

STOLI/IOLI

Stranger/Investor-Originated Life Insurance; banned in most states; investors named as beneficiaries

U.S. Patriot Act

Designed to prevent/detect money laundering and terrorism financing; requires reporting suspicious activity

ERISA

Protects participants in employee benefit plans, including qualified pension plans & group insurance

Gramm-Leach-Bliley Act

Defines consumer vs. customer; requires opt-out opportunity at account establishment and annually thereafter