This lesson focuses on the following topics:
•MINOR APPLICATIONS
•CORRECTING THE APPLICATION
•CONDITIONAL RECEIPT
•REPRESENTATIONS/WARRANTIES
FRAUD/CONCEALMENTMinor Applications
As a rule, minors - mostly persons of age less than 18 - are not allowed to enter
contracts. However, life insurance allows an exception: A person is a minor only until
age 15.
In case the proposed insured is not yet 15 years of age, one of the following persons
will have to sign the application on behalf of that child:
• His/her mother or father.
• A court-appointed guardian.
Correcting the Application:
To change any information on the form, the proposed insured must initial any and all
changes on that application. Extra care must be taken when filling out the application
forms, since the insurance company can cancel or rescind the entire contract from the
date of issue, if the error is discovered after the issuance of a policy. Of course, this
must take place before the incontestability clause of the contract takes effect.
Conditional Receipt:
The receipt located at the bottom of the application is called a conditional receipt. The
agent is advised to collect the first full premium from the applicant at the time of
application, and to use this receipt. Being conditional, it states in very clear terms that
the policy acceptance is subject to the approval of the carrier. It also acknowledges
payment of the first full premium.
Noteworthy: The conditional receipt becomes really important if the proposed
insured dies before the policy is issued. In such a situation, two alternative decisions
exist:
i. If the insurance carrier would have issued the policy to the proposed insured
had he still been living, the proceeds would be paid to the beneficiary.
ii. If the application was destined to be denied, the premium would be returned
to the beneficiary.
Representations/Warranties:
Representations :All statements made on the application are regarded as
Representations and are considered the truth. Even though some representations
may be found to be false, the person making these believes them to be true.
• Warranties :A Warranty, on the other hand, is a statement of absolute truth. No
statement in the application is regarded as a Warranty.
Fraud / Concealment:
Fraud :When a person makes a misrepresentation about a known material fact
with intent to gain advantage, it is classified as a fraud.
• Concealment – The withholding of relevant material information that should have
been provided by the applicant at the time of making the application is classified as
concealment.
As a rule, minors - mostly persons of age less than 18 - are not allowed to enter
contracts. However, life insurance allows an exception: A person is a minor only until
age 15.
In case the proposed insured is not yet 15 years of age, one of the following persons
will have to sign the application on behalf of that child:
• His/her mother or father.
• A court-appointed guardian.
Correcting the Application:
To change any information on the form, the proposed insured must initial any and all
changes on that application. Extra care must be taken when filling out the application
forms, since the insurance company can cancel or rescind the entire contract from the
date of issue, if the error is discovered after the issuance of a policy. Of course, this
must take place before the incontestability clause of the contract takes effect.
Conditional Receipt:
The receipt located at the bottom of the application is called a conditional receipt. The
agent is advised to collect the first full premium from the applicant at the time of
application, and to use this receipt. Being conditional, it states in very clear terms that
the policy acceptance is subject to the approval of the carrier. It also acknowledges
payment of the first full premium.
Noteworthy: The conditional receipt becomes really important if the proposed
insured dies before the policy is issued. In such a situation, two alternative decisions
exist:
i. If the insurance carrier would have issued the policy to the proposed insured
had he still been living, the proceeds would be paid to the beneficiary.
ii. If the application was destined to be denied, the premium would be returned
to the beneficiary.
Representations/Warranties:
Representations :All statements made on the application are regarded as
Representations and are considered the truth. Even though some representations
may be found to be false, the person making these believes them to be true.
• Warranties :A Warranty, on the other hand, is a statement of absolute truth. No
statement in the application is regarded as a Warranty.
Fraud / Concealment:
Fraud :When a person makes a misrepresentation about a known material fact
with intent to gain advantage, it is classified as a fraud.
• Concealment – The withholding of relevant material information that should have
been provided by the applicant at the time of making the application is classified as
concealment.
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