An insurance producer completes a life insurance application for a client, collects the initial premium, and issues a conditional receipt. The producer assures the client, "You are absolutely covered starting right now, regardless of what the home office underwriter decides." Which of the following statements explains why the producer's claim is incorrect?
- Coverage provided by a conditional receipt is only effective if the applicant is ultimately found to be insurable at the applied-for risk class.Cevap
- BConditional receipts function identically to unconditional binding receipts, but only for the first 30 days of the application process.
- CThe initial premium does not represent valid legal consideration until the actual policy is printed and delivered to the client.
- DThe producer has implied authority to guarantee immediate coverage, which makes issuing any type of receipt unnecessary.
Cevap
Coverage provided by a conditional receipt is only effective if the applicant is ultimately found to be insurable at the applied-for risk class.
The producer's statement is incorrect because a conditional receipt does not guarantee absolute coverage. It strictly hinges on the condition that the underwriter ultimately approves the applicant as a standard or better risk.
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Conditional Premium Receipts