Q. What Kind of a commitment have I made when I sign an application for life insurance?
A. You have made no commitment when you sign an application for life insurance. You can change your mind and not proceed with the application at any time.
Q. But, what if I paid a premium with my application…does that change anything?
A. No, there is still no obligation. In fact even after your policy has been delivered to you there is a “free-look” provision that states if you return the policy within the “free-look” time frame, your premium will be returned to you with no questions asked.
Q. What is the duration of the “free-look” period?
A. The time of the “free-look” period will vary depending on the state in which your policy was issued, your age and whether it is life insurance, annuities or long term care. Generally the time is 10-30 days following when your policy was delivered to you. It will appear on your policy, generally on the front page.
Q. What commitment does the life insurance company make after they receive my application?
A, If you submitted the application without paying an initial premium the insurance company has no commitment other than to review the information submitted and then determine if you are insurable and for what premium .
If you submitted a full modal premium with the application and it is accepted, if you die during the underwriting process, the insurance company will continue the underwriting process as though you had not died to determine whether a policy would have been issued. If it would have, the death benefit would be paid. The full terms of this type of payment is described in a “Conditional Receipt” you received when the application was accepted by your agent.
Q. If I can get my money back if I decide not to proceed and I can get “Conditional Coverage” by pre-paying, why wouldn’t I pre-pay?
A. There is no reason not to pre-pay, unless a pre-payment is not allowed.
Q. Why wouldn’t a pre-payment be allowed?
A. The insurance company will probably not allow a pre-payment if the size of the policy exceeds a stated amount, $5,000,000 for example. They will also not accept a prepayment for an individual with a questionable medical history. This is to prevent an application from being submitted with cash on an obvious adverse risk such as an individual about to undergo surgery to remove a tumor from a major organ.
Q. After I have accepted the policy and the free-look period is over, am I under any obligation to the insurance company or agent to keep paying my premium?
A. No. You can stop paying at any time and discontinue your protection. But, the Insurance Company is obligated to keep the policy going according to its provisions as long as you pay the required premiums.
Questions, questions more questions coming up.