On October 5th, a professional cellist applies for an individual disability income insurance policy but chooses not to pay the initial premium at the time of application. The insurer's underwriting department approves the policy as applied for on October 18th. However, on October 22nd, before the agent delivers the policy, the applicant suffers a fractured wrist in a cycling accident. When the agent arrives on October 25th to deliver the policy and collect the first premium, which of the following describes the legal status of the coverage?
- The agent must withhold the policy and return it to the insurer, as coverage cannot take effect without a signed Statement of Good Health verifying no medical changes.Cevap
- BCoverage retroactively took effect on the application date because the insurer's underwriters approved the policy as a standard risk.
- CThe agent may legally deliver the policy and activate coverage provided the applicant pays the premium and signs a revised application detailing the injury.
- DThe policy is already in force because the applicant provided legal consideration through the completed application forms.
Cevap
The agent must withhold the policy and return it to the insurer, as coverage cannot take effect without a signed Statement of Good Health verifying no medical changes.
When an applicant does not submit the initial premium with their application, no conditional receipt can be issued, meaning coverage does not begin during underwriting. Instead, the policy's effective date is delayed until the agent physically delivers the policy, collects the initial premium, and obtains a signed Statement of Good Health. This statement guarantees that the applicant's health has not changed since the application was submitted. Because the cellist suffered a fractured wrist before the delivery date, they cannot truthfully sign this statement, and the agent is legally required to withhold the policy.
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Anahtar Kavram
Effective Date and Statement of Good Health