The purchaser of a life insurance policy policyowner

the individual whose life is covered under the policythe insured

death benefit proceeds are only payable upon death of the? insured

When a policy is owned by a person other than the insured, it is referred to as a third-party ownership

examples of third-party ownership when policies are owned by a spouse, parent, or even an employer of the insured

Transacting insurance can involve any of four different phases in the sale of products solicitation, negotiation, execution of a
contract, and handling matters subsequent to a contract

Producers are required to provide all life insurance applicants with written disclosure regarding information to help applicants make a
more informed decision when purchasing insurance

Buyer's Guide generic brochure developed by the NAIC to assist prospective buyers of life insurance. Descriptions of all basic types
of life insurance as well as comparative costs of each are included.

Policy Summary computer-generated illustration detailing the premiums (current and guaranteed) to be paid, current and
guaranteed interest rates, guaranteed and non-guaranteed values, any projected dividends, and the producer/insurer's name and address

A copy of what must either be provided to the applicant at the time of application or no later than policy delivery? buyer's guide
& policy summary

For an insurance company to receive information by a third party by FCRA laws, what must happen? The applicant must be
notified and give written consent

Who is the Notice of Information Practices disclosed? as part of the application. The signature on the application by the applicant
serves as the notice of information practices

Why must all individually identifiable health information obtained on an applicant during the underwriting process remain
confidential and the applicant's privacy protected? HIPAA's Privacy Rules
Replacement is any transaction in which a new life policy or annuity is to be purchased, and the producer knows, or should know, that
existing contract(s) will be: Lapsed, forfeited, surrendered, or terminated
Reduced in value
Amended with a reduction in benefit or term
Reissued with a reduced cash value
Subjected to borrowing

Conservation the act of saving or keeping the existing policy and preventing it from being replaced

Existing Insurer the insurer that issued the current policy to be replaced.

Replacing Insurer the insurer responsible for issuing the new policy that will replace the existing policy

Producer's responsibilities during life insurance replacement Completing a Notice Regarding Replacement which must be
signed by the applicant and producer

Obtaining information regarding any existing policies, including the names of the existing insurers and policy numbers (this must be
provided to the replacing insurer)

Providing copies of the Notice Regarding Replacement and any sales proposals to the applicant and replacing insurer

Replacing Insurer's during life insurance replacement Notifying the existing insurer of the planned replacement upon receiving
proper notification with the new application

Maintaining copies of the information regarding replacement for a specified period of time

trial application AKA C.O.D., or collect on delivery.

A binding receipt provides immediate coverage if the premium is paid at the time of application

Is a binding receipt allowed for life insurance? no

conditional receipt provides that coverage will become effective as of either the date of application, or the date of completion of
any required medical exam, whichever is later

Underwriting process of selection, classification, and rating

underwriting process of determining if someone is insurable, classifying the risk, and determining the rate or premium to be charged

sources of underwriting the application, medical exams, an Attending Physician's Statement, the Medical Information Bureau
(MIB), an inspection report, and the agent's report.

What is the primary source for underwriting? the application

The application consists of 2 parts Part I contains general questions about the applicant, such as sex/gender, marital status,
residence, date of birth, occupation, and past and present life insurance

Part II contains questions pertaining to medical background, past and present health, any medical visits, medication, height/weight,
hospitalizations, or surgeries in recent years, medical status of immediate family members, including their ages and causes of death

Required medical exams are at the expense of who? the insurer

Attending Physician Statement (APS) used in cases in which the individual application and/or medical reports reveal conditions
for which further information is necessary to determine insurability

MIB, Inc. (Medical Information Bureau) Report primarily used to collect adverse medical information about an applicant's health
and act as an information exchange

The non-profit organization MIB, Inc is owned by who? its members

Can the MIB alone be used to decline an applicant for insurance? No, since its info is general

Inspection Report general report of the applicant's finances, character, morals, work, hobbies, and other habits.

Consumer Investigative Report AKA Inspection Report

Agent's Reporta personal statement submitted by the producer, to the insurer, regarding the applicant's financial condition, any
personal knowledge of the applicant, etc

Does an Agent's Report remain confidential?yes, only between the producer and the insurer

Special Hazardous Activity Questionnaire is used to determine what? If an applicant has engaged in high-risk hobbies (skydiving,
scuba diving, motorcycle racing), a questionnaire is used to determine the risk and frequency of those hobbies and if those activities
will affect insurability.

Underwriting involves analysis of the applicant to determine what? if he/she is acceptable for the proposed insurance

Underwriting attempts to eliminate what? conditions with more frequent and higher claims than the insurer's rates anticipate

What is not considered an underwriting factor? marital status

individual underwriting factors may include: Age

Gender
Tobacco use (smoker/nonsmoker)
Occupation
Hobbies (avocation)
Physical condition (height and weight)
Health history

Rating Applicants Upon receipt of the information, such as the application, medical exam, blood and urine test results, etc.,
underwriters analyze the information and determine if the applicant is an acceptable risk

If an applicant is an acceptable risk, underwriters will then determine what? the classification to be used in the calculation of the
premium

standard risks Individuals who have the same health, habits, sex/gender, and occupational characteristics as those reflected in the
mortality table. Individuals in this category have an average life expectancy.
preferred risks Individuals who meet certain requirements and qualify for lower premiums because of ideal health, height and weight.
Individuals in this category have a longer than average life expectancy.

Substandard Risks (Higher Risk Exposure) Substandard Risks (Higher Risk Exposure) - Individuals who are not acceptable at
standard rates because of poor health, bad habits or occupational hazards. Individuals in this category are issued "rated policies,"
known as surcharges.

declined This is not a rating classification, but a decision that the risk is one for which the insurer refuses to issue insurance. In
this case the applicant is deemed uninsurable. Being declined by one insurance company does not mean a person will be declined by
all other insurance companies.

Premiums are based on what 3 factors? expected mortality, interest, and expenses

Mortality higher the age group, the higher the mortality rate—translating to a higher premium

Mortality Table also show that males have a higher mortality rate than females. Based on this statistic, what will happen to males
premiums? males will pay a higher rate than females.

Interest also used in calculating premium. Insurance premiums are paid in advance and insurance companies invest these
premiums and assume a certain rate of interest will be earned. Interest earnings reduce the amount of premium needed to fund the
future liability of the policy death benefit.

expenses loading The amount charged to cover each policy's share of expenses of operation (salaries, commission, premium
taxes, and cost of doing business)

mode the frequency of payment

Premium payments are made how often? either monthly, quarterly, semiannually, or annually.

Who does the annual mode result in the lowest premium outlay while monthly premiums result in the highest? to offset the lost
interest earnings and increased administration costs

The more frequently the premiums are paid, the more expensive the mode of payment.
constructive delivery When the insurer mails the policy to the producer

legal delivery when the producer delivers the policy to the owner or insured

During policy delivery, its the producer's responsibility to obtain what? delivery signatures and explain policy benefits to the
policyowner/insured.

If a policy is not approved as applied for and is issued as substandard, the insurer may make a "counteroffer" to the applicant by
issuing a policy with a surcharge (higher rating) or exclusions to the policy

a counter-offer policy must be hand-delivered by producer why? to collect any additional premium, explain any substandard rating
or changes in coverage and premium, and reinforce the value of the contract

What needs to be collected before coverage can begin? premium

Statement of Good Health verifies that the insured has remained in the same health status continuously since the time of the
application

Policy delivery will be accomplished by Personal delivery, with signed receipt of delivery

Registered or certified mail with a signed receipt of delivery

face page of the policy will contain the basic information, including the following: Name of the insurance company
Name of the insured and policyowner
Face amount of the policy
Basic description of the type of policy purchased
Policy number and anniversary date
The insurance company's promise to pay the death benefit (Insuring Clause)

To bind the company to the terms of the contract, the

face of the policy also includes signatures of the Executive Officers
!!!! look at policy process diagram !!!!!

Life insurance reduces what? uncertainty, giving a greater peace of mind by replacing the possibility of a larger loss (income) with a
known smaller loss (premium)

Does life insurance eliminate or transfer risk? does not eliminate risk; it transfers the larger risk from the policyowner/insured to
the insurance company

survivor protection Providing funds for surviving spouses and dependents.

estate creation Life insurance proceeds paid in a lump sum provide financial assets to create an immediate estate the insured can pass
on to survivors.

estate conservation Provides money to pay any estate taxes or loans which must be satisfied upon the death of the estate owner (the
insured) preserving the insured's estate.

cash accumulation An amount of cash accessible to the policyowner from within permanent life insurance policies.

liquidity Immediate funds available upon death to pay creditors, taxes and final expenses as well as cash values available for
policy loans, withdrawals, and full surrenders.

Viatical Settlement the sale of a life insurance policy by a terminally ill insured to another party, typically to investors or investor
groups, who hope to profit by the insured's early death

A producer must include their name and address on which of the following? policy summary

the process of selection, classification and rating, and determining if someone is insurable. home office underwriting