Question 71

The insurer waives the right to that information and must honor the contract.

When an insurer approves an incomplete application, it effectively waives its right to the missing information, thereby obligating itself to honor the contract as if the information were complete.

A) The insured must complete the application after the policy has been issued.

This option is incorrect because once the insurer accepts the incomplete application and issues the policy, there is no requirement for the insured to complete the application. The insurer has already approved the application as it stands.

B) The death benefit will be subject to review upon the death of the insured.

This option is also incorrect because, upon approval of the policy, the death benefit is not subject to review based on the completeness of the application. The insurer is bound by the terms of the contract regardless of the application’s completeness.

C) The insurer waives the right to that information and must honor the contract.

This statement is correct, as it accurately reflects the insurer's obligation once it approves an incomplete application. By proceeding with the policy issuance, the insurer accepts the risks associated with the missing information.

D) The agent can at anytime during the term of the policy complete the application.

This option is incorrect since the policy is already in effect. The agent cannot simply complete the application at any time during the policy term without the insurer's approval, as the insurer has already accepted the application as submitted.

Conclusion

The correct answer, C, highlights the legal principle that once an insurer accepts a policy application, it cannot later demand additional information as a condition to honoring the contract. Options A, B, and D fail to recognize the implications of the insurer's acceptance of the incomplete application, making them incorrect in this context.