Tennessee Life Producer Practice Exam

When does coverage go into effect for a life insurance policy if the initial premium is not collected?

1. When the policy is issued

2. When the applicant receives the policy and pays the initial premium

3. Immediately upon the application being signed

4. After a waiting period of 30 days

The correct answer is: When the applicant receives the policy and pays the initial premium

Coverage for a life insurance policy typically goes into effect when the applicant receives the policy and pays the initial premium. This is crucial because the initial premium serves as the consideration for the insurance contract. Without the payment, the insurer does not assume any risk, and thus no coverage can be provided. It's important to understand that while a policy may be issued, it does not become active until the premium payment is made. Simply signing the application does not result in coverage; it's merely an expression of intent to enter into an insurance agreement. The concept of a waiting period is also not applicable here, as life insurance coverage is contingent upon the payment of the premium when the policy is delivered.