A client applies for a comprehensive health insurance policy and submits the standard initial premium. During underwriting, adverse medical history is discovered. Place the following actions in the legally required sequence to properly issue, deliver, and effectuate this counteroffer.
- 1The underwriter rejects the original application and issues the policy with an exclusion rider and a premium surcharge, creating a legal counteroffer.
- 2The insurer mails the amended policy to the producer with instructions to obtain the client's consent before delivery is finalized.
- 3The producer personally meets with the client to thoroughly explain the exclusion rider and the required premium surcharge.
- 4The client signs the policy amendment and pays the additional required premium, legally accepting the new terms.
- 5The producer physically hands over the policy and provides a delivery receipt, which officially triggers the statutory Free-Look period.
Answer
The correct sequence begins with the insurer creating the counteroffer and ends with the physical delivery triggering the Free-Look period.
In insurance contract law, when an applicant is found to be a substandard risk, the insurer rejects the original offer and issues a counteroffer. The policy must then be routed to the producer, who is legally obligated to explain the amendments. Coverage cannot be effectuated until the applicant signs the amendment and pays the additional premium (consideration). Once these conditions are met, the policy is physically delivered, and the delivery receipt establishes the exact start date of the Free-Look period.
Step-by-Step Solution
Key Concept
Counteroffer and Policy Delivery Process