Life Insurance Applications, Delivery, and Policyowner Service
The application
The application is the basis of the contract. It includes general information, medical history, and the producer's report, and the owner and insured sign it. Conditional receipts provide interim coverage if the insurer would have issued the policy as applied for; binding receipts provide immediate coverage regardless of insurability (rare). The producer must record answers accurately, never answer for the applicant, and collect the initial premium if required for coverage.
Delivery and the free look
Delivery occurs when the policy is physically handed over or mailed, depending on state rules. At delivery the producer should confirm the policy matches the application, collect any outstanding premium, obtain a statement of good health if required, and explain the free-look right. Coverage may not begin until the premium is paid and the good-health statement signed.
Policyowner service
Service includes ownership and beneficiary changes, assignments (absolute or collateral), loans, surrender, reinstatement, and address or name changes. A collateral assignment pledges the policy as security for a debt; an absolute assignment transfers all rights. Beneficiary designations control proceeds and generally override a will; per stirpes versus per capita distribution is a frequent test point.
Traps
Questions test (1) whether the producer can backdate or alter an application; (2) who must sign a change request (the owner, not the beneficiary); (3) the difference between conditional and binding receipts; and (4) whether a beneficiary change requires insurer recording to be effective.
Rule of thumb
The owner controls the policy; the insured is the measuring life; the beneficiary receives proceeds. Any request must come from the owner in writing.
Worked example
An applicant pays the first premium with the application and receives a conditional receipt. The insurer later issues a rated policy. Because the policy was not issued as applied for, the conditional receipt may not provide coverage; the producer must disclose the rating and obtain acceptance.