South Carolina Insurance Practice Exam

Upon policy delivery, what must a producer have an applicant sign if no initial premium was collected with the life insurance application?

1. Good health statement

2. Application for coverage

3. Declaration of insurability

4. Policy summary disclosure

The correct answer is: Good health statement

When a life insurance policy is delivered and no initial premium was collected with the application, it is standard practice for the producer to have the applicant sign a good health statement. This document is important because it ensures that the applicant is still in good health at the time of receiving the policy, which is crucial for the insurer’s assessment of risk. The good health statement confirms that the applicant has not experienced any changes in health since the application was submitted. If there are any significant health changes, the insurer may not want to issue the policy based on the initial rates or terms due to increased risk. This requirement is designed to protect both the insurer and the policyholder. For the insurer, it mitigates potential losses from issuing policies to individuals whose health may have declined since the application. For the policyholder, it ensures that the coverage remains valid based on their current health status. Other options, while relevant in various contexts within the insurance process, do not fulfill the specific role of verifying the applicant's health status at the time of policy delivery without collecting an initial premium. A declaration of insurability, for instance, might be used in different scenarios, but it is not the specific document required in this situation.