Application mechanics: signatures, changes, and incomplete applications

Why the application matters so much

The application is not just paperwork. When a life policy is issued, a true copy of the application is attached to it and becomes part of the entire contract. If the copy was not attached when the policy was issued, the insurer cannot later introduce the application as evidence against the policyowner. Everything the applicant writes on it is a representation, a statement believed to be true to the best of the applicant's knowledge, not a warranty that must be literally true. A misstatement can only hurt the applicant if it is material.

The typical life application has three parts:

• Part I, general information: the proposed insured, the owner, the beneficiary, the plan, the face amount and other coverage in force or being replaced.
• Part II, medical information: health history, completed by the applicant, or by a paramedical examiner or physician for larger amounts.
• The producer's (agent's) report: the producer's own observations about the applicant. It goes to the underwriter, but it is not part of the contract and is not attached to the policy.

Who signs

• The applicant (the policyowner) signs, attesting that the answers are true and complete.
• The proposed insured signs if he or she is a different person from the owner. Insuring an adult without that adult's knowledge and written consent is not allowed. For a young child, a parent or guardian signs; New York lets a minor who is at least fourteen and a half contract for insurance on his or her own life.
• The producer signs as witness, certifying that he or she asked the questions and recorded the answers as given.

The producer must never sign for the applicant or the insured, even with permission over the phone. A signature the client did not make misrepresents the client's attestation to the insurer, can put the coverage at risk and is grounds for discipline. Most applications also carry a signed authorization permitting the insurer to gather medical and other records.

Correcting mistakes

If an answer is recorded wrong, the producer may not simply erase it, use correction fluid or write over it.

1. Draw a single line through the incorrect answer.
2. Write the correct answer next to it.
3. Have the applicant initial the change.

Alternatively, complete a new application. The rule behind this is that no one other than the applicant may insert or alter an answer without the applicant's written consent. The insurer may make insertions for administrative purposes only, and must mark them clearly so they are not attributed to the applicant.

Changes the insurer makes after underwriting, such as a different rating, a lower face amount or an exclusion, are not slipped into the application. They go into an amendment that the applicant signs, usually at policy delivery.

Incomplete applications

An application with an unanswered question is incomplete. The insurer normally returns it to the producer to be completed before it underwrites. If the insurer instead issues the policy without the missing answer, it is treated as having waived its right to that information, and it cannot later contest or rescind the policy because the answer was missing.

Only the insurer can change the contract

A producer cannot modify the policy or waive any of its terms. The policy can be changed, and a right or requirement waived, only in writing signed by a person the insurer names in the policy, usually an officer. If an insured, beneficiary or assignee later asks in writing for a copy of an application for reinstatement or a policy change, the insurer must deliver or mail it within 15 days. Otherwise it cannot use that application as evidence.