Life Insurance Basics
Field underwriting and the application
The producer begins underwriting: complete the application (Part 1 general/business, Part 2 medical), obtain signatures, collect the initial premium, and deliver required disclosures - MIB, HIPAA privacy notice, Fair Credit Reporting Act notice, and state replacement forms. The completed application with premium is the offer; policy issuance is the acceptance. Underwriting results in standard, substandard (rated/higher premium), or declined classification.
What drives premium
Three factors: mortality (expected deaths), interest (earnings on reserves), and expense (loading). Premium increases with age and health risk. Mode matters: annual is cheapest per year; semiannual, quarterly, and monthly modes add cost. Backdating up to six months saves age and lowers premium.
Conditional receipt and delivery
With a conditional receipt, coverage is effective from the date of application or completed medical exam provided the proposed insured proves insurable under the insurer's rules. Without a receipt, coverage begins when the policy is delivered and the first premium is paid; delivery may be constructive (mailed). The free-look period is typically 10 days (30 days for replacement policies).
Comparing costs and replacing coverage
Buyers Guides and policy summaries use the interest-adjusted net cost and net payment indexes. Dividend illustrations are never guaranteed. Replacement requires a signed notice and comparison; the replacing producer must identify existing coverage.
Trap: statements that coverage always begins at physical delivery, or that the producer underwrites and issues the policy. Rule of thumb: receipt collected and requirements complete → coverage dates to the application; no receipt → coverage dates to delivery plus premium.