Massachusetts Life Producer Practice Exam

When does the coverage for a life insurance applicant become effective if they were issued a conditional receipt?

1. Upon policy delivery

2. Date of application

3. Date of issuance of the conditional receipt

4. Upon final underwriting approval

The correct answer is: Date of issuance of the conditional receipt

The coverage for a life insurance applicant becomes effective on the date of issuance of the conditional receipt, provided that certain conditions outlined in the receipt are met. A conditional receipt is given to the applicant when they have submitted their application and the first premium payment, indicating that coverage may begin immediately, rather than waiting for the formal policy to be issued. This is critical because the conditional receipt typically states that the insurance coverage is effective from the date of receipt, as long as the applicant meets underwriting standards established by the insurer and is ultimately deemed insurable. The protection offered by the conditional receipt allows applicants some peace of mind as they await the final decision from the insurer. In contrast, options such as policy delivery, date of application, or final underwriting approval do not apply here because they do not directly relate to the coverage being effective per the terms set forth in the conditional receipt. The coverage could start right away, rather than only becoming effective at a later point, emphasizing the importance of understanding the terms associated with the conditional receipt issued by the insurer.