Life & Health Insurance Exam (National Portion)Underwriting and Policy IssueMedium
A producer submits an application for a life insurance policy to an insurer. The applicant did not submit the initial premium with the application. When will the coverage typically become effective?
- AWhen the policy is delivered to the applicant and the first premium is paid.
- BImmediately upon the producer's submission of the application to the insurer.
- CUpon the underwriting department's approval of the application, regardless of premium payment.
- DOn the date the medical examination is completed, provided the applicant passes.
Show answer & explanationAnswer & explanation
Correct answer: A. When the policy is delivered to the applicant and the first premium is paid.
If no premium is paid with the application, coverage does not begin until the policy is delivered to the applicant, and the first premium is collected. The act of paying the premium and receiving the policy signifies acceptance of the offer.
Why the other options are wrong
- B. Submission alone without premium does not bind coverage.
- C. Underwriting approval is a step, but the offer isn't accepted until the premium is paid.
- D. A medical exam is part of underwriting, but coverage still requires premium payment and policy delivery.
Effective Date (No Premium with App)
When an applicant does not pay the initial premium with the application, the policy's effective date is typically when the policy is delivered to the applicant and the first premium is collected.
- No premium with application = no conditional coverage
- Policy delivery + first premium payment = effective date
- Applicant accepts the offer at this point
Memory trick: No Money, No Policy - until Delivery and Payment!