An applicant wants immediate temporary coverage while an individual life insurance application is being underwritten. Which statement is correct?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Life and disability insurance cannot be bound by a mere oral agreement; the binder familiar in property-casualty insurance does not apply to life coverage. Temporary protection may exist only through a conditional receipt given at application, which provides coverage if the applicant is insurable at the rate applied for, or when the policy is actually issued and delivered. The exam frequently tests this distinction between property-casualty binders and the stricter rule that life coverage is not bound orally. Because life coverage cannot be bound by word of mouth, applicants needing immediate protection must obtain a conditional receipt and satisfy its insurability requirements.
Why the other options are wrong
- B) Temporary coverage under a conditional receipt is conditional on insurability and on the receipt's terms; it is not automatic for every applicant. The conditional receipt protects the applicant during underwriting if the risk is acceptable at the rate applied for.
- C) A time-limited binder is a property-casualty concept and is not available for individual life insurance under any time frame. Coverage depends on the applicant's insurability and the terms of the receipt, so not every applicant is protected.
- D) Group life plans operate through enrollment and certificates rather than binders; no life product, group or individual, is bound orally. Group enrollment also follows application and certificate procedures rather than property-style binders.
Memory hook
No oral binder for life: coverage waits for a conditional receipt or the actual policy. Property rules do not travel here.