During a routine meeting, a client submits a completed application for a $300,000 term life insurance policy along with a check for the initial premium. The producer accepts the payment and hands the client an approval receipt. Three days later, before the home office has processed the paperwork, the client dies in a sudden accident. Upon subsequent review, the underwriting department concludes that the client was in perfect health and would have been classified as a standard risk. How will the insurance company proceed?
- AThe claim must be honored due to the producer's acceptance of the initial payment, which automatically binds the coverage.
- BThe death benefit is payable in full, since the underwriting review confirmed the applicant was an acceptable risk on the date of application.
- The company will return the premium without paying the death benefit, because coverage does not take effect until formal approval is granted.Cevap
- DThe company is liable for the full coverage amount, because the exchange of premium creates an immediate and unconditional contract.
Cevap
The company will return the premium without paying the death benefit, because coverage does not take effect until formal approval is granted.
Under an approval receipt, coverage does not become effective until the insurer reviews and formally approves the application. Because the applicant died prior to this approval taking place, there was no insurance contract in force, meaning the insurer's only obligation is to return the initial premium.
Adım Adım Çözüm
Anahtar Kavram
Approval Receipts