On November 12th, a 55-year-old high school principal applies for a $500,000 term life insurance policy. The producer collects the initial premium and issues a conditional insurability receipt. The insurer requires a standard medical examination, which the applicant completes on November 15th. On November 18th, the applicant suffers a fatal heart attack. Two days later, the home office underwriters review the completed medical exam results and determine that the applicant was insurable as a standard risk as of the exam date. How will the insurance company handle the death benefit claim?
- AIt will deny the claim because the home office had not formally approved the application before the applicant died.
- BIt will pay the full death benefit because the coverage became effective immediately upon payment of the premium on November 12th.
- It will pay the full death benefit because the coverage became retroactively effective on the date of the medical exam.Cevap
- DIt will deny the claim and refund the initial premium because the policy was not officially issued before the applicant's death.
Cevap
The insurer will pay the full death benefit because the coverage became retroactively effective on the date of the medical exam.
Under a conditional insurability receipt, coverage becomes effective on the date of the application or the date of the required medical exam, whichever is later. Since a medical exam was required, the effective date was November 15th. Because the applicant was found to be insurable as a standard risk on that date, the coverage was in force when the applicant died on November 18th, obligating the insurer to pay the claim.
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Anahtar Kavram
Conditional Insurability Receipts and Effective Dates