Offer and acceptance in a life insurance application
When an applicant submits the application with the initial premium, the applicant makes the offer, and the insurer accepts by issuing the policy as applied for. If the insurer issues the policy on different terms, that is a counteroffer.
Key facts for the exam
- With the premium, the application is the applicant's offer. The insurer accepts by issuing the policy as applied for; issuing on different terms is a counteroffer.
- The applicant's consideration is the premium payment and the statements made in the application.
- With a conditional receipt, a claim before the policy is issued turns on whether the applicant was insurable as applied for on the receipt's conditions.
- Without premium, coverage cannot take effect if the applicant's health changes before delivery and payment, and the producer must not deliver the policy.
- A statement of good health is taken at delivery when no premium was paid with the application.
The trap. With premium, the applicant makes the offer, not the insurer. Without premium, a change in health before delivery means the policy is not delivered.
How the exam asks about it
- An applicant completes an application and pays the initial premium with it. In contract terms, what has the applicant done?
- When an applicant submits a completed application WITH initial premium, what legal act does the applicant perform in contract law?
- In an insurance contract, what constitutes the applicant's legal consideration?
- An applicant pays the premium with the application and receives a conditional receipt, then dies before the policy is issued. What governs the claim?
- An applicant submits an application without premium. The policy is issued as applied for. Before delivery and premium collection, the applicant suffers a severe heart attack. What must the producer do at delivery?
- When is a statement of good health obtained on delivery of a life insurance policy?
Where it sits on your state's exam
| State exam | Share of exam | ≈ Scored questions | Outline section |
|---|---|---|---|
| Texas | 15% | 12 of 80 | Completing the Application, Underwriting, Delivering Policies, Contract Law |
| Florida | 14% | 12 of 85 | Completing the Application, Underwriting, and Delivering the Policies |
| Georgia | 15% | 12 of 80 | Completing the Application, Underwriting, and Delivering the Policy |
| New York | 19% | 19 of 100 | Life Insurance Basics |