Question 71

The effective date of coverage begins on the date the policy is delivered and premium is paid.

In general, for a life application that is not prepaid, coverage becomes effective when the policy is delivered and the first premium is paid. This ensures that the insurer has received the necessary payment before the coverage is activated.

A) application is signed

Choosing this option would imply that coverage starts as soon as the applicant signs the application. However, this is incorrect because signing the application does not guarantee that the insurer has accepted the risk or that payment has been made.

B) company underwriter approves the risk

While the underwriter's approval is a critical step in the application process, it does not mark the beginning of coverage. Coverage is only effective after the policy is delivered and payment is made, making this option misleading.

C) policy is delivered and premium is paid

This option accurately reflects the correct procedure for activating life insurance coverage. Coverage commences once the insured receives the policy and the first premium has been paid, ensuring that the insurer is protected against risk.

D) application is postmarked and mailed to the insurer

This answer suggests that coverage begins when the application is sent, which is incorrect. Merely sending the application does not establish coverage; it must be approved and the policy delivered with payment received for coverage to start.

Conclusion

The correct answer is option C, as it clearly outlines the conditions under which life insurance coverage becomes effective. Other options either misrepresent the timing of when coverage starts or overlook essential steps in the insurance process, such as the need for payment and delivery of the policy.