Eleanor applies for an individual disability income policy on October 12th but chooses not to submit the initial premium with her application. The underwriter approves the policy as a standard risk on October 25th, and the insurer forwards it to the producer. On November 2nd, the producer meets with Eleanor to personally deliver the policy, at which time she writes a check for the initial premium.
Which of the following actions MUST the producer take during this November 2nd meeting to properly establish the policy's effective date?
- Obtain a signed Statement of Good Health from Eleanor to confirm her medical status has not changed since the application date.Answer
- BIssue a conditional receipt to Eleanor, which will retroactively make the coverage effective as of October 12th.
- CUnilaterally amend the original application date to November 2nd so that it matches the premium payment date.
- DExercise their implied authority to verbally bind the policy, bypassing the need for further medical questions.
Answer
The producer must obtain a signed Statement of Good Health from Eleanor to confirm her medical status has not changed since the application date.
Because no premium was collected when the application was completed, no coverage could take effect at that time. To finalize the contract at delivery, the producer must not only collect the premium but also secure a signed Statement of Good Health. This document protects the insurer by verifying that the applicant has not suffered an injury or illness since they were originally underwritten.
Step-by-Step Solution
Key Concept
Statement of Good Health Requirement