On April 14, Elena, a freelance graphic designer, completes an application for a term life insurance policy, pays the initial premium, and is given a conditional insurability receipt by her agent. The policy requires a medical examination, which Elena completes on April 19. Tragically, Elena is killed in a car accident on April 22 before the insurer has processed the application. During the subsequent review, the underwriter determines that Elena met the insurer's requirements for a standard risk class based on the April 19 medical results. What is the insurer's legal obligation regarding the death benefit claim?
- Pay the full death benefit, as coverage became retroactively effective on the date of the medical examination.Answer
- BDeny the claim and refund the initial premium, because the policy had not been formally approved and issued prior to the applicant's death.
- CDeny the claim, because the agent lacked the express authority to legally bind the insurer to the contract at the time of application.
- DPay a prorated death benefit based solely on the initial premium consideration paid, because the insurance contract was not yet fully executed.
Answer
Pay the full death benefit, as coverage became retroactively effective on the date of the medical examination.
The correct answer states that the full death benefit must be paid. Under a conditional insurability receipt, coverage becomes effective retroactively on the date of the application or the date of the required medical exam, whichever is later, provided the applicant is found to be insurable as a standard risk. Since Elena completed her exam on April 19 (which is later than the April 14 application date) and was determined to be insurable, her coverage was in effect at the time of her death on April 22.
Step-by-Step Solution
Key Concept
Conditional Insurability Receipts and Effective Dates
Estimated Time:1m 15s