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Completing the health insurance application

Lesson 62 of 92 · All lessons · Up next: Sources of insurability and HIPAA privacy disclosures →

The application is where underwriting starts

The agent is the insurer's field underwriter. Before a home-office underwriter sees anything, the agent meets the applicant, asks the questions, and records the answers. A careless application leads to delays, wrong premiums, denied claims, or a policy that gets rescinded later. A careful one protects the applicant, the insurer, and the agent.

The parts of a health insurance application

  1. Part I: general information. Name, address, date of birth, sex, occupation, income where disability income coverage is involved, the type and amount of coverage requested, and any other health coverage in force or being replaced.
  2. Part II: medical information. The proposed insured's health history, current conditions, medications, treatment, and the names of physicians who have seen them. On family coverage, answers are needed for every person to be covered.
  3. The agent's report. The agent's own statement: how well they know the applicant, anything observed that the questions did not capture, and whether the new policy replaces existing coverage. This part goes to the underwriter, not into the policy.
A five-step flow across the page shows how an agent completes a health insurance application. Step one, Part one general information: identity, occupation, coverage requested, and other coverage. Step two, Part two medical history: conditions, medications, physicians, answered for every person to be covered. Step three, signatures and authorizations: the applicant, and the proposed insured if different, sign; the agent witnesses; the applicant signs the medical information and Medical Information Bureau authorization and receives the Fair Credit Reporting Act notice. Step four, premium and receipt: if the premium is paid, a conditional receipt is given; if not, coverage starts at delivery. Step five, the agent's report goes to underwriting with the agent's observations and any replacement, and it is not part of the policy. A box underneath lists the ground rules. Ask every question and record answers as given. Leave no blanks, because issuing a policy with a blank waives that answer. Correct errors by striking through them and having the applicant initial, with no correction fluid and no edits after signing. The application is attached to the policy, the answers are representations, and only material misstatements count.
Five steps of completing a health insurance application in the field

Rules for filling it out

  • Ask every question and record the answer as given. The agent never answers for the applicant or leaves out something the applicant said.
  • Do not leave blanks. If the insurer issues a policy with a question left unanswered, it is generally treated as having waived that information. It cannot later deny coverage over the missing answer.
  • Correct errors properly. Draw a line through the mistake, write the correct answer, and have the applicant initial the change. Do not use correction fluid, and never change an answer after the applicant has signed.
  • Get the right signatures. The applicant signs; if the proposed insured is a different adult, that person signs too. The agent signs as a witness to what was recorded.

Authorizations and notices

Along with the application, the applicant usually signs an authorization to release medical information so the insurer can obtain records from doctors, hospitals, and the Medical Information Bureau. Under the federal Fair Credit Reporting Act, the applicant must also be told when a consumer report or investigative consumer report may be ordered. If existing coverage is being replaced, the required replacement disclosure is completed as well.

Premium and receipts

If the applicant pays the first premium with the application, the agent issues a conditional receipt. Coverage can then start on the date of the application or of the medical exam, as long as the applicant is found insurable as applied for. If no premium comes with the application, coverage begins only when the policy is delivered and the premium is paid. At that point the agent often gets a statement of good health confirming nothing has changed.

Why accuracy matters later

A copy of the application is attached to the policy and becomes part of the entire contract. The applicant's answers are treated as representations, meaning statements believed to be true, rather than guarantees. Only a material misrepresentation, one that would have changed the insurer's decision, justifies denying a claim or rescinding coverage. After the policy's contestable period, that right is limited to fraudulent misstatements.

Key terms

Sample questions

When an agent takes a health insurance application, the agent is acting as the insurer's:

  • Claims adjuster
  • Home-office underwriter
  • Field underwriter
  • Actuary
Reveal answer

Correct answer: Field underwriter

The agent meets the applicant, asks the questions and records the answers before anyone at the home office sees the case, which makes the agent the insurer's field underwriter.

Which information is normally collected in Part I of a health insurance application?

  • The proposed insured's medical history and current medications
  • The agent's observations about the applicant
  • The applicant's name, date of birth, occupation and the coverage requested
  • The home-office underwriter's rating decision
Reveal answer

Correct answer: The applicant's name, date of birth, occupation and the coverage requested

Part I is the general-information section: identity, age, sex, occupation, the type and amount of coverage requested and any other coverage in force or being replaced.

Part II of a health insurance application is primarily concerned with:

  • The proposed insured's health history, current conditions, treatment and physicians
  • The applicant's address, occupation and requested coverage amount
  • How long the agent has known the applicant
  • The premium payment method and billing schedule
Reveal answer

Correct answer: The proposed insured's health history, current conditions, treatment and physicians

Part II is the medical-information section: health history, current conditions, medications, treatment and the names of physicians who have seen the proposed insured.

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