An agent tells an applicant, 'You are approved; your coverage is in force,' immediately after collecting the first premium but before the insurer's underwriting review is complete. If the applicant dies the next day and the insurer never approved the application, which statement is most accurate?

Why A is correct

In California, life insurance cannot be bound by an agent's oral assurance; there is no binder available in life insurance the way there is in some property-casualty lines. Coverage begins only when the insurer accepts the application, typically evidenced by policy issuance, and any temporary coverage depends on the insurer's own terms, such as a conditional receipt. An agent who promises immediate coverage is exceeding actual authority, and the insurer is not bound by that promise. If the application is declined, any premium paid is generally returned.

Why the other options are wrong

• B) Payment of the first premium alone does not create coverage; it is a condition accompanying an application, not an acceptance of it.
• C) The applicant's belief is irrelevant to contract formation; coverage requires the insurer's acceptance, not just the applicant's reliance on the agent's words.
• D) An agent acting beyond actual authority cannot bind the insurer to an oral promise the insurer never made or ratified.

Memory hook

No binder in life insurance. 'You are approved' is a promise the agent cannot legally make.