Completing the health insurance application

The application is the underwriter's first look

For an individual health policy, the application is where the insurer gets the facts it uses to decide whether to accept the risk, at what premium, and with what exclusions. The producer acts as the field underwriter: the person who sees the applicant face to face, asks every question, and records the answers accurately. A careless application is the most common source of later claim disputes.

What the application contains

• Part I, general information: name, address, date of birth, sex, occupation, income where disability income is involved, the coverage and riders requested, the beneficiary for any accidental death benefit, and any other health coverage in force or being replaced.
• Part II, medical information: the proposed insured's health history, current treatment, medications, physicians consulted, hospital stays and lifestyle risks such as tobacco use. Where an applicant is covering a family, the questions are answered for each person.
• The agent's report (producer's statement): the producer's own observations, how long the producer has known the applicant, whether the coverage replaces other insurance, and anything the underwriter should know. It is not part of the contract and is not given to the insured.
• Authorizations and notices: an authorization to release medical information (needed under federal health-privacy rules), a notice that the insurer may get a consumer or investigative report under the Fair Credit Reporting Act, and a notice about sharing information with the Medical Information Bureau (MIB).

Answers, changes and signatures

Every question must be answered. If the insurer issues the policy with a question left blank, it is generally treated as having waived that information and cannot later rely on the missing answer. Answers are recorded exactly as the applicant gives them; the producer never "improves" or guesses an answer.

If an answer must be corrected, the producer should not erase it or use correction fluid. The correct practice is to strike through, write the correction, and have the applicant initial the change. Otherwise, a new application is completed.

The applicant (and the proposed insured, if a different adult) must sign, and the producer signs as witness. A producer must never sign for an applicant.

Premium and the receipt

The best practice is to collect the initial premium with the application. That shows the applicant's good faith and lets the producer issue a conditional receipt, so coverage can begin once the applicant is found insurable, often as of the application or exam date. If no premium is collected, coverage cannot begin until the policy is delivered and the premium is paid, usually with a statement of good health at delivery.

Why accuracy matters later

Under the entire contract provision, a copy of the application is attached to the policy and becomes part of it. Statements in the application are representations, true to the best of the applicant's knowledge. A material misrepresentation can let the insurer rescind or deny a claim, but only within the limits of the time limit on certain defenses provision: after the policy has been in force for the stated period, usually two years, only fraudulent misstatements can be used to void it.

Under the federal Affordable Care Act, individual major medical coverage can no longer be refused or rated on health history, so medical questions matter most today for disability income, long-term care and other supplemental coverage. The application discipline is the same either way.