Producer Marcus meets with a prospective client, Elena, to finalize a disability income insurance application. Elena provides the initial premium, and Marcus issues a conditional receipt. While organizing the file, Marcus notices that Elena left a question about hazardous hobbies completely unanswered. Which of the following statements regarding the handling of this incomplete application are correct?
- Marcus must arrange for Elena to answer the omitted question and personally initial the addition before the application is submitted.Answer
- If the insurer issues the policy with the question left blank, the insurer waives its right to deny a future claim based on her hazardous hobbies.Answer
- CMarcus has the authority to write in "none" for the unanswered question as long as Elena verbally confirmed she had no such hobbies during their meeting.
- DIf the application is submitted with the blank question, the insurer will proceed with underwriting and automatically assign a substandard risk classification.
- EThe issued conditional receipt provides Elena with unconditional, binding coverage immediately, regardless of the application's incomplete status.
Answer
The correct statements are that the agent must have the applicant complete and initial the missing information, and that the insurer waives its rights if it issues the policy based on the blank application.
The correct statements address the strict legal protocols for handling incomplete applications and the concept of waiver. First, any changes or additions to an application must be made with the applicant present, and the applicant must initial the change to verify its accuracy. Second, if an insurer accepts an incomplete application and issues a policy without requiring the missing information, it legally waives its right to contest claims based on the omitted data.
Step-by-Step Solution
Key Concept
Handling Incomplete Applications and the Doctrine of Waiver