Marketing, Underwriting and Policy Delivery Practices
Marketing rules
The insurer must approve advertising and sales materials, and records must be retained. Life insurance sales require a buyer's guide and a policy summary; illustrations must show both guaranteed and current values with disclosure language. Promotions may not promise free insurance or misstate the insurer's financial strength. Telemarketing must respect do-not-call rules.
Underwriting
The agent is the field underwriter - the insurer's first line of risk selection. Answer every application question completely and honestly; do not answer for the client. Sources of information include the application (general and medical parts), paramedical exam and lab work, attending physician statements, the Medical Information Bureau (which codes information, not full reports, and requires notice), consumer/inspection reports under the Fair Credit Reporting Act, and financial underwriting for large face amounts. Classifications include preferred plus, preferred, standard, substandard (table-rated) and declined. Misrepresentation or concealment of material fact allows rescission during the two-year contestability period.
Delivery and the conditional receipt
A policy must be delivered while the insured is alive and in good health. Delivery includes explaining the free look, conversion and reinstatement rights, confirming the beneficiary, and collecting the initial premium. A conditional receipt provides coverage from the date of the application or the medical exam, whichever is later, but only if the applicant proves insurable under the insurer's rules; if the insurer requires the premium at delivery and the applicant's health has changed, a statement of good health is required. Constructive delivery - unconditionally delivering the policy to the agent for the client - can bind coverage. Backdating to save age is limited to six months and shortens the contestability and suicide periods.
Trap: the conditional receipt is not unconditional coverage, and a change in health before delivery can void it.