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Difficulty: EasyInitial Premium and Premium Receipts

Arrange the following events in the correct chronological order for a standard life insurance application process where a conditional receipt is utilized.

  1. 1The applicant completes the application and pays the initial premium.
  2. 2The agent issues a conditional receipt to the applicant.
  3. 3The applicant undergoes the required medical examination.
  4. 4The underwriter approves the policy as applied for.
  5. 5The agent physically delivers the issued policy to the insured.

Answer

The correct sequence is: Application and premium payment, Issuance of conditional receipt, Medical examination, Underwriting approval, and finally Policy delivery.
In the standard underwriting process, the collection of the initial premium accompanies the application submission. The agent immediately issues a conditional receipt in exchange for this premium. The applicant then completes any required medical exams. Once all requirements are met, the underwriter approves the policy, which is finally delivered by the agent.

Step-by-Step Solution

1
Identify the initial transaction.
The applicant submitting the application and paying the initial premium is the starting point.
An offer to the insurance company is typically made when the application and initial premium are submitted together.
2
Determine the immediate consequence of the initial payment.
The agent issues the conditional receipt.
Agents must provide a receipt at the exact time the initial premium is collected to outline the conditions of early coverage.
3
Identify the next underwriting requirement.
The medical examination takes place.
Under a standard conditional insurability receipt, the medical exam must be completed for any conditional coverage to take effect.
4
Determine the final administrative steps.
The underwriter approves the policy, followed by the agent delivering it.
Approval by the home office must occur before a policy can be issued and subsequently delivered to the insured.

Key Concept

Chronology of Initial Premium and Conditional Receipts
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Topics

Initial Premium and Premium Receipts

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