Arizona Life and Health Practice Exam

What is a requirement for an insurance policy to be considered in effect?

1. The first premium must be paid

2. The policy must be signed by the insurer

3. The applicant must be in good health

4. All documents must be submitted

The correct answer is: The first premium must be paid

For an insurance policy to be considered in effect, the requirement that the first premium must be paid is fundamental. This payment signifies the applicant's acceptance of the insurer's offer and activates the policy coverage. When the insurer accepts the initial premium, it legally binds the contract, meaning that coverage can begin as stipulated in the policy terms. While there may be other factors involved in activating a policy, such as the insurer's endorsement and health considerations, these do not universally apply to all contracts in the way that the payment of the first premium does. The other choices pertain to additional conditions or processes but do not serve as the primary requirement for the policy to be effective. Thus, the payment of the first premium is the critical step for coverage to officially commence.