California Life-Only & Accident and Health AgentCalifornia Law - Life and Accident & HealthMedium
A life insurance agent is completing an application for a client in California. The client has indicated on the application that they have never been diagnosed with a serious illness, but during a follow-up conversation, they admit to having been treated for a critical heart condition five years ago that required surgery. What is the agent's primary obligation regarding this new information?
- ASubmit the application as is and let the insurer discover the discrepancy during underwriting.
- BAdvise the client to correct the application to accurately reflect their medical history.
- CIgnore the verbal admission if it contradicts the written application to avoid delays.
- DInform the client that the policy will likely be denied and suggest applying with a different insurer.
Show answer & explanationAnswer & explanation
Correct answer: B. Advise the client to correct the application to accurately reflect their medical history.
Agents have a fiduciary duty to ensure that all information provided in an insurance application is accurate and complete. Failing to disclose material facts can lead to policy rescission or denial of claims.
Why the other options are wrong
- A. Submitting an application with known inaccuracies is a violation of ethical and legal obligations.
- C. Ignoring material information is a breach of fiduciary duty and unethical.
- D. While denial is possible, the primary obligation is to ensure accuracy, not to pre-judge the outcome or suggest avoidance.
Agent's Duty to Disclose Material Facts (CA)
In California, insurance agents have a legal and ethical obligation to ensure that all material facts pertinent to an insurance application are accurately disclosed to the insurer.
- Ensures policy validity
- Protects both insurer and insured
- Prevents fraud and misrepresentation
Memory trick: Agents must 'Light Up' the truth on applications, ensuring no shadows hide facts.