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The process of issuing a life insurance policy begins with solicitation. In simplest terms, solicitation of insurance means an attempt to persuade a person to buy an insurance policy, and it can be done orally or in writing. This includes providing information about available products, describing the policy benefits, making recommendations about a specific type of policy, and trying to secure a contract between the applicant and the insurance company.
Any sales presentations used by insurers or their agents in communication with the public must be accurate and complete.
Every applicant for a life insurance policy must be given a written disclosure statement that provides basic information about the cost and coverage of the insurance being solicited. This disclosure statement must be given to the applicant no later than the time the application for insurance is signed. Disclosure statements will help the applicants to make more informed and educated decisions about their choice of insurance.
The term illustration means a presentation or depiction that includes nonguaranteed elements of a policy of individual or group life insurance over a period of years. A life insurance illustration must do the following:
An agent may only use the illustrations of the insurer that have been approved, and may not change them in any way.
An illustration used in the sale of a life insurance policy must contain the following basic information:
When using an illustration in the sale of a life insurance policy, an insurer or its producers may NOT do any of the following:
If an interest rate used to determine the illustrated nonguaranteed elements is shown, it may not be greater than the earned interest rate underlying the disciplined current scale.
A buyer's guide provides basic, generic information about life insurance policies that contains, and is limited to, language approved by the Department of Insurance. This document explains how a buyer should go about choosing the amount and type of insurance to buy, and how a buyer can save money by comparing the costs of similar policies. Insurers must provide a buyer's guide to all prospective policy applicants prior to accepting their initial premium. If the policy contains an unconditional refund provision of at least 10 days (free-look period), a buyer's guide can be delivered with the policy.
A policy summary is a written statement describing the features and elements of the policy being issued. It must include the name and address of the agent, the full name and home office or administrative office address of the insurer, and the generic name of the basic policy and each rider. A policy summary will also include premium, cash value, dividend, surrender value and death benefit figures for specific policy years. The policy summary must be provided when the policy is delivered.
A buyer's guide provides generic information on various types of policies. A policy summary provides specific information on the policy being issued.
To help consumers make educated decisions on purchasing life insurance, the industry developed specific methods and indexes that measure and compare the actual policy costs. These comparisons are usually included in policy illustrations.
The Traditional Net Cost method compares the cash values available to buyers if they surrender the policy in 10 or 20 years. This index does not take into consideration the time value of money (or investment return on the insurance premium had it been invested elsewhere). Although this is the easiest cost-comparison method and can be helpful in determining income tax liability under the policy, it can also be the most misleading when used to estimate policy costs. Use of this method for comparing policy costs is illegal in most U.S. jurisdictions.
Interest-Adjusted Net Cost method considers the time value of money (or investment return on the insurance premium had it been invested elsewhere) by applying an interest adjustment to yearly premiums and dividends. This means that each year premiums and dividends are figured, interest is taken into consideration. Two versions of the interest-adjusted method are the surrender cost index and the net payment cost index.
The Commissioner may, by regulation, adopt a term life insurance monetary value index (similar to the Life Insurance Surrender Cost Index) to be disclosed in all advertisements and policies of term life insurance for individuals 55 years of age or older. In developing a term life insurance monetary value index, the Commissioner must consider actual premiums and policy benefits and the manner in which they are affected with the passage of time. Any term life insurance monetary value index must assume that the insured would want to retain coverage for at least 10 years.
Underwriting is the risk selection process. The underwriter's responsibilities include selecting only those risks that are considered insurable and meet the insurer's underwriting standards. The purpose of underwriting is to protect the insurer against adverse selection (risks which are more likely to suffer a loss).
The primary criteria an underwriter will use in assessing the desirability of a particular candidate for life insurance includes the applicant's health (current and past), occupation, lifestyle, and hobbies or habits. The underwriter will use many different sources of information in determining the insurability of the individual risk. The specific underwriting requirements will also differ by insurers.
The agent is the company's front line, and is referred to as a field underwriter because the agent is usually the one who has solicited the potential insured. As a field underwriter, the agent has many important responsibilities during the underwriting process and beyond, including the following:
A life insurance producer is the company's field underwriter.
The Application is the starting point and basic source of information used by the company in the risk selection process. Although applications are not uniform and may vary from one insurer to another, they all have the same basic components: Part 1 - General Information and Part 2 - Medical Information.
Part 1 – General Information of the application includes the general questions about the applicant, such as name, age, address, birth date, gender, income, marital status, and occupation. It will also inquire about the existing policies and if the proposed insurance will replace them. Part 1 identifies the type of policy applied for and the amount of coverage, and usually contains information concerning the beneficiary.
Part 2 – Medical Information of the application includes information on the prospective insured's medical background, present health, any medical visits in recent years, medical status of living relatives, and causes of death of deceased relatives. If the amount of insurance is relatively small, the agent and the proposed insured will complete all of the medical information. That would be considered a nonmedical application. For larger amounts, the insurer will usually require some sort of medical examination by a professional.
It is the agent's responsibility to make certain that the application is filled out completely, correctly, and to the best of the applicant's knowledge. The agent must probe beyond the stated questions in the application if the agent has any reason to believe the applicant is misrepresenting or concealing information, or does not understand the specific questions asked. Any information that is misleading, inaccurate or illegible may delay the issuance of the policy. If the agent feels that there could be some misrepresentation, the agent must inform the insurance company. Some insurers require that the applicant complete the application under the agent's watchful eye, while other insurers require that the agent complete the application in order to help avoid mistakes and unanswered questions.
If an application is taken at the time of purchase and a policy is then issued, the application must be attached to the policy. The policy and the application constitute the entire contract between the parties, and no additional documents may be incorporated into the contract unless endorsed and attached to the policy. Any statements made by the insured in the application are considered representations and not warranties.
As a field underwriter, the agent (or producer) can be considered the most important source of information available to the company underwriters. The agent's (producer's) report provides the agent's personal observations concerning the proposed insured. The insurer may inquire whether the agent knows of any adverse information about the applicant, or ask the agent to express an opinion about the applicant's character, financial standing, and environment. The agent's report does not become a part of the entire contract, although it is a part of the application process.
Both the agent and the proposed insured (usually the applicant) must sign the application. If the proposed insured and the policyowner are not the same person, such as a business purchasing insurance on an employee, then the policyowner must also sign the application. An exception to the proposed insured signing the application would be in the case of an adult, such as a parent or guardian, applying for insurance on a minor child.
Know that the applicant's signature attests to the accuracy of the information in the application.
When an answer to a question on the application needs to be corrected, agents have the option, depending on which insurer they represent, of correcting the information and having the applicant initial the change, or completing a new application. An agent should never erase or white out any information on an application for insurance.
Before a policy is issued, all of the questions on the application must be answered. If the insurer receives an incomplete application, the insurer must return it to the applicant for completion. If a policy is issued with questions left unanswered, the contract will be interpreted as if the insurer waived its right to have an answer to the question. The insurer will not have the right to deny coverage based on any information that the unanswered question might have contained.
Most agents attempt to collect the initial premium and submit it along with the application to the insurer. In addition, collecting the initial premium at the time of the application increases the chance that the applicant will accept the policy once it is issued. Whenever the agent collects premiums, the agent must issue a premium receipt. The type of receipt issued will determine when coverage will be effective.
The most common type of receipt is a conditional receipt, which is used only when the applicant submits a prepaid application. The conditional receipt says that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, as long as the applicant is found to be insurable as a standard risk, and policy is issued exactly as applied for. This rule will not apply if a policy is declined, rated, or issued with riders excluding specific coverages.
If an agent collects the initial premium from an applicant and gives the applicant a conditional receipt, and the applicant dies the next day, the underwriting process will proceed as though the applicant were still alive. If the insurer ends up approving the coverage, then the applicant's beneficiary will receive the death benefit of the policy. If, on the other hand, the insurer determines that the applicant was not an acceptable risk and declines the coverage, the premium will be refunded to the beneficiary, and the insurer is not required to pay the death benefit.
Conditional receipt means the applicant may be covered as early as the date of the application.
The approval conditional receipt coverage begins only when the prepaid application is approved by the insurer (but before the policy is delivered). Therefore, there is no coverage during the initial underwriting process. This type of receipt is rarely used.
The unconditional (binding) receipt is rarely used in life insurance. Binders are more commonly found in property insurance. When the agent issues a binding receipt, coverage begins immediately for a specific length of time, even if the applicant is later found to be uninsurable. Binding receipts usually stipulate that coverage is effective from the date of the application for only a specified period of time, such as 60 days, or until the company either issues or declines coverage, whichever occurs first.
Note that written binders are deemed to be valid insurance policies for the purpose of proving that the insured has coverage. This does not apply to life insurance. Binders are prohibited in life and disability policies.
The underwriting process may often require a considerable amount of time. To bridge the gap between the applicant's request for an immediate coverage and the insurer's need for thorough underwriting, insurance companies offer their customers a Temporary (or Interim) Insuring Agreement. This agreement requires payment of the first premium at the time of application, but does not guarantee that a policy will be issued.
There are three types of Temporary Insuring Agreements:
The temporary term is the protection period offered by binding receipts. During this time period, an insurance company is liable for the maximum amount guaranteed under the binding receipt/temporary insurance agreement.
A nonmedical application is the medical portion of an application which accepts a health questionnaire completed and signed by the applicant and the agent and does not require a medical examination.
If the amount of insurance is relatively nominal, the agent and insured will complete all of the medical information. For larger amounts, the insurer will usually require some sort of medical examination by a professional.
Pre-selection – The agent or broker is able to accomplish good pre-selection by a complete, accurate and thorough completion of the insurance application. The application will ask for all of the legally allowed information which an insurer may gather in order to do effective post-selection underwriting.
During the application process, the agent is in a position to terminate at any time if he finds that the client poses an untenable risk to the insurance company, or to explain to the clients why their risk may be higher than normal. Forewarning clients of a possible premium rating can help them overcome "sticker shock" later.
If an applicant is morbidly obese, the application could still be submitted to the insurer, but the producer should warn the applicant that since his height/weight ratio is out of the standard range, that he can expect to pay a significantly higher premium. The same applies to smokers, extreme sports enthusiasts, skin divers, and similar risk individuals.
The producer is not allowed to collect information which is not asked for on the application, but can seek details for those items which do appear. This can include dosages and frequency of use of medications, extent of involvement in hazardous activities, specifics regarding employment duties, etc.
It is also necessary to emphasize the responsibility of the producer to not withhold from the principal any information which may be negative in regard to the client's risk.
Post-selection – Once the producer has elected to complete and submit an application, the in-house underwriters begin the post-selection process.
Using the application as a springboard, the underwriter begins an investigation of the client's complete risk profile. Federal and state law delineates the types and extent of information which can be acquired and considered. After considering all of the information legally available, the underwriter will label the client as standard, substandard or uninsurable.
If the client is sub-standard, she will be offered the opportunity to obtain coverage under a higher than standard premium. The client can, of course, decline to be insured under the stated conditions.
After the agent receives a signed authorization for disclosure of information, the underwriter can begin an investigation using the following sources of information:
In order to properly select and classify insurance risks, the insurer needs to obtain the applicants' background information and medical history. There are several sources of underwriting information that are available to the underwriters.
Application
The person applying for insurance must submit an application to the insurer for approval for a policy to be issued. The application is one of the main sources of underwriting information for the company.
An insurance application is the key source underwriters use for information about the applicant.
Agent's Report
The agent's report allows the agent to communicate with the underwriter and provide information about the applicant known by the agent that may assist in the underwriting process.
Investigative Consumer Report (Inspection)
To supplement the information on the application, the underwriter may order an inspection report on the applicant from an independent investigating firm or credit agency, which covers financial and moral information. They are general reports of the applicant's finances, character, work, hobbies, and habits. Companies that use inspection reports are subject to the rules and regulations outlined in the Fair Credit Reporting Act.
Fair Credit Reporting Act
The Fair Credit Reporting Act established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used. The law also protects consumers against the circulation of inaccurate or obsolete personal or financial information.
The acceptability of a risk is determined by checking the individual risk against many factors directly related to the risk's potential for loss. Besides these factors, an underwriter will sometimes request additional information about a particular risk from an outside source. These reports generally fall into 2 categories: Consumer Reports and Investigative Consumer Reports. Both reports can only be used by someone with a legitimate business purpose, including insurance underwriting, employment screening, and credit transactions.
Consumer reports include written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.
Investigative Consumer Reports are similar to consumer reports in that they also provide information on the consumer's character, reputation, and habits. The primary difference is that the information is obtained through an investigation and interviews with associates, friends and neighbors of the consumer. Unlike consumer reports, these reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested. The consumers must be advised that they have a right to request additional information concerning the report, and the insurer or reporting agency has 5 days to provide the consumer with the additional information.
Insurance applicants must be notified in writing whenever insurers request investigative consumer reports.
The reporting agency and users of the information are subject to civil action for failure to comply with the provisions of the Fair Credit Reporting Act. A person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses may also be fined and/or imprisoned for up to 2 years.
An individual who unknowingly violates the Fair Credit Reporting Act is liable in the amount equal to the loss to the consumer, as well as any reasonable attorney fees incurred in the process.
An individual who willfully violates this Act enough to constitute a general pattern or business practice will be subject to a penalty of up to $2,500.
Under the Fair Credit Reporting Act, if a policy of insurance is declined or modified because of information contained in either a consumer or investigative report, the consumer must be advised and provided with the name and address of the reporting agency. The consumer has the right to know what was in the report. The consumer also has a right to know the identity of anyone who has received a copy of the report during the past year. If the consumer challenges any of the information in the report, the reporting agency is required to reinvestigate and amend the report, if warranted. If a report is found to be inaccurate and is corrected, the agency must send the corrected information to all parties to which they had reported the inaccurate information within the last 2 years.
Consumer reports cannot contain certain types of information if the report is requested in connection with a life insurance policy or credit transaction of less than $150,000. The prohibited information includes bankruptcies more than 10 years old, civil suits, records of arrest or convictions of crimes, or any other negative information that is more than 7 years old. As defined by the Act, negative information includes information regarding a customer's delinquencies, late payments, insolvency or any other form of default.
For policies with higher amounts of coverage or if the application raised additional questions concerning the prospective insured's health, the underwriter may require a medical examination of the insured. There are two options, depending on the reason for the medical examination:
In addition to an attending physician's report, the underwriter will usually request the MIB Report.
MIB Group, Inc. (formerly known as the Medical Information Bureau) is a membership corporation owned by member insurance companies. It is a nonprofit trade organization, the purpose of which it is to collect, maintain, and make available to insurance companies important underwriting information on applicants for life and health insurance. It is a systematic method for companies to compare the information they have collected on a potential insured with information other insurers may have discovered. The MIB can be used only as an aid in helping insurers know what areas of impairment they might need to investigate further. An applicant cannot be refused solely because of adverse information discovered through the MIB.
Insurers cannot refuse coverage solely on the basis of adverse information on an MIB report.
Medical examinations, when required by the insurance company, are conducted by physicians or paramedics at the insurance company's expense. Usually, such exams are not required with regard to health insurance, thus stressing the importance of the agent in recording medical information on the application. The medical exam requirement is more common with life insurance underwriting. If an insurer requests a medical examination, the insurer is responsible for the costs of the exam.
It is common among insurers to require an HIV test when an applicant is applying for a large amount of coverage, or for any increased and additional benefits. To ensure proper obtaining and handling of results, and to protect the insureds' privacy, when an insurer requires an applicant to submit to an HIV test, the insurer must do the following:
The following are guidelines to help insurers avoid unfair underwriting for the risk of HIV/AIDS:
From an ethical and nondiscrimination standpoint, no insurer or its agents may consider the individual's gender, sexual orientation, marital status, living arrangements, occupation, zip code, or other such related demographic characteristic in determining whether to take an application, provide coverage, or perform any medical testing. The insurers cannot ask if the insured has been tested before, unless it was for insurance purposes. None of this information should be either on the application or implied. This is so the underwriter can make a clearly unbiased determination and avoid overt or apparent discrimination. The only allowable criterion that a company may use to determine whether to test for HIV is the amount of insurance the applicant has applied for at certain age ranges.
Negligently disclosing confidential results or underwriting information to unauthorized third parties may result in a civil fine of up to $1,000 plus court costs. The fine may go up to $5,000 plus costs for willful violations. If the violation causes economic, bodily, or psychological harm to the other party, the penalty may include a misdemeanor charge, one year in jail, and/or a fine of up to $10,000.
Genetic characteristics means any scientifically or medically identifiable gene or chromosome that is known to be a cause of a disease or disorder, and that is determined to be associated with a statistically increased risk of development of a disease or disorder. Examples of genetic conditions include Tay-Sachs, sickle cell, and X-linked hemophilia.
Insurers cannot require a test of the presence of a genetic characteristic for the purpose of determining insurability (except in policies that are contingent on testing for other diseases or medical conditions). Whenever a genetic characteristic test is conducted, the insurer must first obtain the applicant's written consent. The insurer must also notify the applicant of a test result directly or through a designated physician.
The Health Insurance Portability and Accountability Act (HIPAA) is a federal law that protects health information. HIPAA regulations provide protection for the privacy of certain individually identifiable health information (such as demographic data that relates to physical or mental health condition, or payment information that can identify the individual), referred to as protected health information. Under the Privacy Rule, patients have the right to view their own medical records, as well as the right to know who has accessed those records over the previous 6 years. The Privacy Rule, however, allows disclosures without individual authorization to public health authorities authorized by law to collect or receive the information for the purpose of preventing or controlling disease, injury, or disability.
When insurers plan to seek and use information from investigators, they must first provide the applicant/insured with a written Disclosure Authorization Notice. It will state the insurer's practice regarding collection and use of personal information. The disclosure authorization form must be written in plain language, and must be approved by the head of the Department of Insurance.
In classifying a risk, the Home Office underwriting department will look at the applicant's past medical history, present physical condition, occupation, habits and morals. If the applicant is acceptable, the underwriter must then determine the risk or rating classification to be used in deciding whether or not the applicant should pay a higher or lower premium. A prospective insured may be rated as one of the three classifications: standard, substandard, or preferred.
The higher the risk, the higher the premium.
Standard risks are persons who, according to a company's underwriting standards, are entitled to insurance protection without extra rating or special restrictions. Standard risks are representative of the majority of people at their age and with similar lifestyles. They are the average risk.
Preferred risks are those individuals who meet certain requirements and qualify for lower premiums than the standard risk. These applicants have superior physical condition, lifestyle, and habits.
Substandard (High Exposure) risk applicants are not acceptable at standard rates because of physical condition, personal or family history of disease, occupation, or dangerous habits. These policies are also referred to as "rated" because they could be issued with the premium rated-up, resulting in a higher premium.
Applicants who are rejected are considered declined risks. Risks that the underwriters assess as not insurable are declined. For example, a risk may be declined for one of the following reasons:
Once the company determines that an applicant is insurable, they need to establish an appropriate policy premium. The premium will be used to cover the costs and expenses to keep the policy in force. Premiums are paid in advance.
There are three primary factors that are used in premium determination: risk (mortality – rate of death within a specific group), interest and expense.
Mortality is the ratio of the number of deaths in a specific population over a certain amount of time versus the number of living people in that population. Mortality tables, used by insurers, indicate the number of individuals within a specified group of individuals (e.g., males, females, smokers, nonsmokers) starting at a certain age, who are expected to be alive at a succeeding age. In other words, these tables help the insurers predict the expectation of life and the probability of death for a given group.
Because premiums are paid before claims are incurred, insurance companies invest a large portion of the premiums in an effort to earn interest on these funds (invested in bonds, stocks, or mortgages). The interest earnings help insurers reduce the premium rates for policyowners.
The expense factor, also known as the loading charge, also affects premium rates. Insurers have various operating expenses, so each premium must carry a proportionate share of these operating costs. The insurer's largest expense is the commissions paid to its agents. Other ongoing expenses include payroll, rent, and taxes.
In regard to insurance premiums, mode refers to the frequency the policyowner pays the premium. An insurance policy's rates are based on the assumption that the premium will be paid annually at the beginning of the policy year and that the company will have the premium to invest for a full year before paying any claims. If the policyowner chooses to pay the premium more frequently than annually, there will be an additional charge because the company will have additional expenses in billing the premium. However, the premium may be paid annually, semi-annually, quarterly, or monthly.
Higher Frequency = Higher Premium
If the insured dies during a period of time for which the premium has been paid, the insurer must refund any unearned premium along with the policy proceeds.
Single premium — The policyowner makes one lump-sum payment to the insurance company to create a policy. A single premium whole life policy will generate immediate cash value due to the size of the lump sum payment that is made to the insurance company. Most companies require a minimum premium of $5,000 or more for a single premium policy.
Limited pay — A level annual premium. The policy is designed so premiums for the coverage will be completely paid up before age 100. Some of the more common versions of limited-pay life are 20-pay life whereby coverage is completely paid for in 20 years, and life paid-up at 65 (LP-65) whereby the coverage is completely paid for by the insured's age 65. When the premium-paying period is condensed to a shorter duration, a higher annual premium is required.
Modified pay — A lower premium is charged in the first few policy years, usually the first three to five years, and then a higher level premium is paid for the remainder of the insured's life. These policies were developed to make the purchase of whole life insurance more attractive for individuals who, for example, are just starting out and have limited financial resources.
Level — Most life insurance policies have a level premium, which means that the premium remains the same throughout the duration of the contract.
Fixed vs. flexible — With a fixed premium, the same amount is paid periodically; with a flexible premium, the policyowner is allowed to pay more or less than the planned premium.
Guaranteed at Initial Level vs. Initial and Maximum Premiums — Depending on the type of policy, premiums can either remain the same for the entire policy period, or can increase and decrease at different times.
Term policies and most permanent policies have premiums guaranteed at initial levels (or level premium for the life of the policy). The insurer "overcharges" the insured in the policy's early years, and applies that excess in the later years to fund the increased mortality costs.
Insurers use premium tables to determine the cost of insurance based on the insured's age and other underwriting factors. These tables can also be used to compare the initial premiums and maximum premiums charged by 2 types of policies for a specific class of insured.
Below is a sample premium table that shows estimated initial and maximum premiums for 2 types of policies for the same insured:
| Year | Level Premium Term | Annually Renewable Term |
|---|---|---|
| 1 | $400 | $300 |
| 2 | $400 | $315 |
| 3 | $400 | $325 |
| 4 | $400 | $345 |
| 5 | $400 | $380 |
| 6 | $400 | $455 |
| 7 | $400 | $525 |
| 8 | $400 | $600 |
| 9 | $400 | $725 |
| 10 | $400 | $850 |
| 11 | $400 | $1,000 |
| 12 | $400 | $2,225 |
| 13 | $400 | $2,350 |
| 14 | $400 | $2,540 |
| 15 | $400 | $2,625 |
| TOTAL | $6,000 | $15,560 |
Premium Estimates for $500,000 of Term Life Insurance Coverage
These rates are calculated for a 35-year-old male, nonsmoker. These are sample rates only; actual rates may vary due to other underwriting factors.
Once the underwriting process has been completed and the company issues the policy, the agent will deliver it to the insured. Although personal delivery of the insurance policy is the best method of finalizing the insurance transaction, mailing the policy directly to the policyowner is acceptable. When the insurer relinquishes control of the policy by mailing it to the policyowner, the policy is considered legally delivered. However, it is advisable to obtain a signed delivery receipt.
Basic to all contract law, life and/or disability insurance policies must be signed and dated to remain valid and avoid conflict.
More specifically, the California Code requires that all life/disability contracts issued or delivered in this state must be signed and dated by the policyowner the day the owner/client receives the policy. Nothing added to the policy after this date will be considered as a part of the entire contract by any ruling judge, unless agreed upon by both parties to the contract. These additions must be signed by each party and attached to the original contract. Any statements made and incorporated into the policy are considered representations.
The following are acceptable methods of delivery:
Note: Without written and signed proof of delivery, the burden of proof of delivery falls on the insurer and its agent in any legal dispute. Without a signature and date, it is difficult to establish when the appropriate free-look period or right of rescission started. If a loss should occur during this time, it needs to be clear whether a claim should be paid and whether the client accepted or rejected the policy. It is also good practice to get a signed and dated receipt/note when a client rejects a policy in case the client passes away shortly thereafter (and the family expects an incorrect death benefit).
The following are advantages of personal delivery:
Personal delivery of the policy allows the agent an opportunity to make sure that the insured understands all aspects of the contract. Review of the contract with the insured involves pointing out provisions or riders that may be different than anticipated, and explaining what effect they have on the contract. In addition, the agent should explain the rating procedure to the client, especially if the policy is rated differently than applied for, or has been modified or amended in any other way. The agent should also explain any other choices and provisions available to the policyowner that may become active at this time.
The policy title (specification) page is the first page of a life insurance policy. This page contains a summary of the benefits and coverages the policy will provide. In addition, the following information is provided on the title page:
If the initial premium is not paid with the application, the agent will be required to collect the premium at the time of policy delivery. In this case, the policy does not go into effect until the premium has been collected. The agent may also be required to get a statement of good health from the insured. This statement must be signed by the insured, and verifies that the insured has not suffered injury or illness since the application date.
If the full premium was submitted with the application and the policy was issued as requested, the policy coverage would generally coincide with the date of application if no medical exam were required. If a medical exam is required, the date of the coverage will coincide with the date of the exam.
NO premium, NO coverage.
Unlike with property and casualty policies that use standard policy forms, there are NO "standard" life insurance policies.