Arizona Life and Health Practice Exam

What must be given to a life insurance applicant when the agent receives an application and the initial premium?

1. Conditional Receipt

2. Policy Document

3. Premium Payment Receipt

4. Disclosure Statement

The correct answer is: Conditional Receipt

When an agent receives an application for life insurance along with the initial premium, a Conditional Receipt must be provided to the applicant. This document is crucial because it outlines the temporary coverage granted while the insurer is processing the application. The Conditional Receipt assures the applicant that their coverage will be in effect from the date of the receipt, assuming the application is approved and under the insurer's standard underwriting guidelines. If the application is subsequently declined, the insurance company is not obligated to pay a death benefit, but the applicant is informed that they receive the coverage only if the application is accepted. In contrast, other documents listed do not provide the same level of assurance regarding immediate coverage. For instance, the Policy Document is issued only after the application has been fully processed and acceptance has been confirmed. A Premium Payment Receipt serves primarily as proof of payment rather than as an acknowledgment of coverage, and the Disclosure Statement typically contains information on the terms and conditions of the policy rather than acting as a temporary insurance agreement.