California Life-Only & Accident and Health AgentLife InsuranceMedium
An agent is explaining the process of policy delivery to a new life insurance client. The agent informs the client that if the initial premium was NOT paid with the application, the agent must collect the premium and obtain a signed statement of continued good health. What is the primary purpose of this statement?
- ATo acknowledge receipt of the policy documents by the client.
- BTo ensure the client has not experienced a significant health change since the application.
- CTo verify the client's current address for policy mailing.
- DTo confirm the client's understanding of the policy terms and conditions.
Show answer & explanationAnswer & explanation
Correct answer: B. To ensure the client has not experienced a significant health change since the application.
The statement of continued good health protects the insurer by ensuring that the applicant's health status has not deteriorated between the time of application and policy delivery, thereby preventing adverse selection.
Why the other options are wrong
- A. Acknowledgement of receipt is usually a separate form or signature, not combined with a health declaration.
- C. Address verification is typically done earlier in the process or through other means, not specifically with a good health statement.
- D. Understanding policy terms is important, but a separate 'statement of good health' isn't the primary tool for this.
Statement of Continued Good Health
A declaration signed by an applicant at the time of policy delivery, if the initial premium was not paid with the application, affirming that their health has not significantly changed since the application date.
- Required when initial premium is not paid with application
- Protects insurer against adverse selection
- Confirms health status remains as originally represented
Memory trick: Deliver the policy, deliver the health update.