Life Insurance Underwriting, Beneficiaries, and Policy Delivery
Underwriting inputs
The application has Part I (general data) and Part II (medical history), plus the agent's report. Insurers use the Medical Information Bureau (codes only, never a denial by itself), attending physician statements, paramedical exams, inspection reports, and credit-based insurance scores where permitted. HIV testing requires separate written consent and state notice. Classifications run preferred through standard to substandard (table ratings or flat extras) or decline.
Receipts and effective date
A conditional receipt provides coverage only if the proposed insured meets the insurer's underwriting conditions - typically a statement of good health and payment of the initial premium. A binding receipt gives immediate coverage. The application is the offer; policy issuance is acceptance; coverage generally takes effect on delivery and payment of the first premium. Backdating (usually up to six months) saves age but requires paying back premiums.
Beneficiaries
Primary, contingent, and irrevocable. A revocable beneficiary may be changed by the owner at will; an irrevocable beneficiary must consent in writing. Designations should specify per stirpes (by branch) or per capita (by head) and address common disaster and simultaneous death. Minors cannot receive proceeds directly - a guardian, trust, or UTMA is needed. Spendthrift and facility-of-payment clauses protect proceeds from creditors or speed small payments.
Traps
The agent may change the beneficiary (false - only the owner), divorce automatically voids the designation (varies by state - never assume), and a conditional receipt means immediate coverage (only if its conditions are met).
Rule of thumb
Deliver the policy, collect the premium, obtain a signed statement of good health, and confirm the beneficiary designation in writing.
Worked example
A client gives a check with the application and receives a conditional receipt, then suffers a heart attack before the exam. The claim is evaluated under the receipt's conditions, not automatically paid.