Life & Health Insurance Exam (National Portion)Underwriting and Policy IssueMedium
An applicant for a life insurance policy initially pays the first premium and receives a Conditional Receipt. The applicant then undergoes a medical exam. If the applicant dies before the policy is issued, under what conditions will the death benefit typically be paid?
- AOnly if the policy was physically delivered to the applicant before death.
- BOnly if the insurer had already approved the application, regardless of the medical exam results.
- CIf the cause of death was unrelated to any pre-existing conditions disclosed in the application.
- DIf the applicant would have been insurable according to the insurer's underwriting standards at the time of application.
Show answer & explanationAnswer & explanation
Correct answer: D. If the applicant would have been insurable according to the insurer's underwriting standards at the time of application.
A Conditional Receipt provides coverage from the date of application or medical exam (whichever is later) IF the applicant would have been insurable under the insurer's standard underwriting rules. The condition is insurability, not actual policy issuance or cause of death.
Why the other options are wrong
- A. Physical delivery is for policy acceptance, not for conditional coverage.
- B. The Conditional Receipt's coverage hinges on insurability, which includes the medical exam results, not just prior approval.
- C. While pre-existing conditions are relevant to insurability, the general condition is overall insurability, not just the cause of death being unrelated to disclosed conditions.
Conditional Receipt
A receipt given to an applicant who pays the initial premium, providing temporary coverage from the application date (or medical exam date) if the applicant is found to be insurable based on the insurer's underwriting rules.
- Provides temporary coverage
- Coverage is 'conditional' on insurability
- Dated from application or medical exam (whichever is later)
Memory trick: Conditional Receipt: It's 'C'overage 'I'f 'I'nsurable, not 'P'olicy 'D'elivered.