Life & Health Insurance Practice Exam

When must a policyholder pay premiums for insurance coverage to become effective?

1. Before signing the application

2. Upon delivery of the policy

3. With the application submission

4. Before any medical exams are conducted

The correct answer is: With the application submission

The correct choice is that a policyholder must pay premiums for insurance coverage to become effective at the time of application submission. This means when an individual applies for insurance and submits the application, the insurer typically requires the initial premium to be paid for the policy to be active. This payment confirms the applicant's intent to acquire coverage and secures the policy while the insurer processes the application. It’s essential because if the premiums are not paid, the coverage cannot commence, regardless of any subsequent approvals or examinations. Understanding this timing is crucial in the insurance process, as it establishes the policyholder's commitment and starts the coverage period. While options related to the signing of the application, delivery of the policy, or medical examinations may involve other procedural steps, they do not trigger the inception of insurance coverage in the same manner as the premium payment at the time of application.