Application & Underwriting

Question 1

What is underwriting?

Answer 1

The insurer’s process of assessing the risk of insuring a life.

Question 2

What is the agent’s role in underwriting?

Answer 2

Collect accurate info, confirm IDs, witness signatures, and be the “eyes” of the insurer.

Question 3

What happens after policy issue but before delivery?

Answer 3

Agent must confirm no material changes in health, occupation, or finances.

Question 4

What is field underwriting?

Answer 4

The agent’s role in helping the applicant complete the application honestly and fully.

Question 5

Who is the applicant? Who is the life insured?

Answer 5

Applicant = policyholder if issued; Life insured = person whose life is covered.

Question 6

What is a contingent owner?

Answer 6

Successor owner if the applicant/policyholder dies.

Question 7

What is a contingent beneficiary?

Answer 7

Receives death benefit if original beneficiary has died.

Question 8

When is a beneficiary designation irrevocable?

Answer 8

When it cannot be changed without written consent of the beneficiary.

Question 9

What must applicants justify?

Answer 9

Insurable interest and reasonable amount of coverage.

Question 10

What are examples of insurable interest?

Answer 10

• Self
• Spouse
• Child/grandchild
• Dependent
• Employee
• Someone with pecuniary interest

Question 11

What are the 3 main problems in applications?

Answer 11

• Mistakes
• Fraudulent misrepresentation
• Incomplete information

Question 12

What is the contestability period?

Answer 12

First 2 years; insurer can void policy for material misstatement. After 2 years, only fraud voids a contract.

Question 13

What is a TIA?

Answer 13

Temporary coverage during underwriting if application + first premium submitted.

Question 14

What are typical TIA requirements?

Answer 14

• Completed application
• 1st premium
• “No” answers to health questions
• Age limits (e.g., 15 days–70 yrs)

Question 15

What are typical TIA coverage limits?

Answer 15

Lesser of a fixed amount (e.g., $250K–$500K) or amount applied for.

Question 16

When does TIA coverage end?

Answer 16

At expiry (60–90 days), when policy issued, or upon denial.

Question 17

What is an APS?

Answer 17

Attending Physician’s Statement — doctor’s summary of applicant’s health.

Question 18

When is a medical exam required?

Answer 18

High coverage amounts, older age, or medical concerns.

Question 19

What is the MIB?

Answer 19

Medical Information Bureau — database of coded health & lifestyle info shared between insurers.

Question 20

What is an MVR?

Answer 20

Motor Vehicle Record — driving history (speeding, DUI, suspensions).

Question 21

What is an inspection report?

Answer 21

Report on habits, finances, occupation, and lifestyle, often via interview.

Question 22

What is financial underwriting?

Answer 22

Ensures amount is reasonable (e.g., 30× income for young, 10× for older, or tied to net worth).

Question 23

How are frequent travelers or risky avocations underwritten?

Answer 23

May face exclusions, ratings (higher premiums), or denials.

Question 24

What is accelerated underwriting?

Answer 24

Full underwriting using data/AI (MIB, MVR, credit history), often without medical exams.

Question 25

How is accelerated underwriting different from simplified issue?

Answer 25

Accelerated = fully underwritten, can give preferred/rated classes; Simplified = no exams, higher premiums, fewer classes.

Question 26

What are the 5 general risk classes?

Answer 26

* Standard * Preferred * Rated * Excluded * Declined

Question 27

What is a rated policy?

Answer 27

Higher-than-standard premiums for above-average risk.

Question 28

What is an exclusion?

Answer 28

Specific cause of death not covered (e.g., hazardous travel).

Question 29

Can a rating be removed?

Answer 29

Yes, if risk factor no longer applies (e.g., change of occupation).

Question 30

Key client factors affecting premiums?

Answer 30

* Age * Gender * Health/risk class * Occupation * Lifestyle

Question 31

What is attained age?

Answer 31

Age used for premium calculations (last, next, or closest birthday).

Question 32

Why do men generally pay more than women?

Answer 32

Higher mortality at any given age.

Question 33

What company factors affect premiums?

Answer 33

* Mortality costs * Administration expenses * Investment returns

Question 34

What is the retention limit?

Answer 34

Max risk insurer keeps on one life before using reinsurance.

Question 35

How does reinsurance work?

Answer 35

Insurer cedes risk above retention to a reinsurer, who pays share of claims.

Question 36

What must an agent confirm at delivery?

Answer 36

No material changes in health, occupation, lifestyle, or finances.

Question 37

What is the client’s “free-look” right?

Answer 37

Right of rescission — 10 days to cancel policy for full premium refund.

Question 38

How is group life insurance underwritten?

Answer 38

Based on demographics of group, not individual health.

Question 39

How are premiums for group base coverage quoted?

Answer 39

Flat rate per $1,000 of coverage for each class of employee.

Question 40

When is evidence of insurability required in group plans?

Answer 40

For optional/additional coverage beyond the base.

Question 41

What is post-claim underwriting (in creditor insurance)?

Answer 41

Minimal underwriting at issue; claim investigated after death — may be denied if applicant never qualified.