When applying for a new life insurance policy, David submits his application along with the first month's premium and is given a conditional receipt by his agent. Which of the following statements accurately describe the conditions and effective date of his coverage? (Select all that apply)
- The policy will become effective on the date of the application or required medical exam, as long as David is determined to be an acceptable risk.Answer
- If David dies while the application is still being processed, the death benefit will be paid if the insurer would have approved the policy as applied for.Answer
- CThe conditional receipt provides David with an absolute guarantee of coverage regardless of the final underwriting decision.
- DThe insurer requires David to sign a Statement of Good Health at policy delivery before any coverage can go into effect.
Answer
The correct statements are that coverage becomes effective on the application or medical exam date if David is insurable, and the death benefit will be paid if he dies during underwriting provided he was an acceptable risk.
A conditional receipt dictates that coverage is effective as of the date of the application or the date of any required medical exam, whichever is later, on the condition that the applicant is found insurable as a standard or better risk. Consequently, if the applicant dies before the physical policy is issued, the insurer will still pay the claim if underwriting confirms the applicant was insurable on that effective date.
Step-by-Step Solution
Key Concept
Initial Premium and Conditional Receipts