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Question

Difficulty: EasyPolicy Delivery Methods

Arrange the following steps in the correct chronological order for a life insurance application process where the applicant did NOT pay the initial premium at the time of application.

  1. 1The applicant completes and submits the application without paying the initial premium.
  2. 2The insurance company underwrites the risk and issues the policy.
  3. 3The agent receives the issued policy and personally delivers it to the applicant.
  4. 4The applicant signs a Statement of Good Health and pays the initial premium.

Answer

The correct order is: 1) Application submitted without premium, 2) Policy underwritten and issued, 3) Policy delivered by the agent, 4) Statement of Good Health signed and premium paid.
When an applicant does not pay the initial premium at the time of application, the application is simply an invitation to make an offer. The insurer underwrites the risk and issues the policy (making the formal offer). The agent then delivers the policy to the client. To accept the offer and put the policy into effect, the applicant must finally pay the initial premium and sign a Statement of Good Health, which verifies that their medical condition has not changed since the application was taken.

Step-by-Step Solution

1
Identify the initial step of the transaction.
The applicant completes and submits the application without paying the initial premium.
The insurance process always begins with the prospective insured filling out the application.
2
Determine the insurer's action.
The insurance company underwrites the risk and issues the policy.
The insurer must review the application, assess the risk, and formally issue a policy before it can be delivered.
3
Identify the agent's responsibility upon issuance.
The agent receives the issued policy and personally delivers it to the applicant.
Once issued, the policy is typically sent to the producer to be delivered and explained to the client.
4
Determine the final requirements to effectuate coverage.
The applicant signs a Statement of Good Health and pays the initial premium.
Because no premium was paid at the time of application, coverage does not begin until the premium is collected and the applicant formally attests that their health has not negatively changed since the application date.

Key Concept

Policy Delivery without Initial Premium
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Topics

Policy Delivery Methods

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