South Carolina Life and Health Practice Exam

What will occur if a life insurance applicant dies the day after receiving a conditional receipt?

1. The claim will be denied

2. The claim will be paid if the application is approved

3. A new application will be required

4. The beneficiary will receive a refund

The correct answer is: The claim will be paid if the application is approved

When a life insurance applicant receives a conditional receipt, it serves as a temporary coverage agreement. This receipt indicates that coverage may begin immediately, depending on specific conditions, such as the insurer's approval of the application and the payment of premiums. If the applicant dies the day after receiving this conditional receipt, the claim will be assessed based on the conditions outlined in the receipt itself. Assuming the application is ultimately approved and all criteria for coverage are satisfied, the claim will be paid to the beneficiary. This is because the conditional receipt effectively provides coverage from the date of acceptance, as long as the underwriting requirements are met. In this scenario, since the applicant passed away shortly after receiving the receipt, as long as the application gets approved, the insurer has an obligation to honor the coverage implied by the receipt. Therefore, the insurer will pay the claim to the beneficiary once the application is confirmed and meets the necessary criteria. This highlights the importance of understanding how conditional receipts function in life insurance policies.