On April 4th, Elena applies for a $250,000 term life insurance policy, pays the initial premium, and is issued a conditional insurability receipt. The insurer requires her to complete a routine medical exam, which she finishes on April 8th. Tragically, Elena dies in an automobile accident on April 10th. On April 15th, the insurer's underwriting department reviews her completed file and determines she met all criteria to be classified as a standard risk. Based on these facts, what is the insurer's legal obligation regarding the death benefit?
- The insurer must pay the full $250,000 death benefit because coverage became retroactively effective on the date of the medical exam.Cevap
- BThe insurer must deny the claim and refund the premium because the policy had not been physically issued and delivered prior to her death.
- CThe insurer must deny the claim because the underwriting department did not officially approve the application until after the applicant had died.
- DThe insurer must pay the claim, but only because the producer had the implied authority to bind coverage immediately upon accepting the premium check.
Cevap
The insurer must pay the full $250,000 death benefit because coverage became retroactively effective on the date of the medical exam.
When an applicant pays the initial premium and receives a conditional insurability receipt, coverage becomes effective on the date of the application or the date of the required medical exam, whichever is later—provided the applicant is ultimately found to be insurable at a standard or preferred rate. Because the applicant finished her exam on April 8th and was found to be a standard risk, the policy was legally in effect when she died on April 10th. The insurer must pay the death benefit.
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Conditional Insurability Receipts and Effective Date of Coverage
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