Question

No premium paid, no receipt issued. When does the policy go into effect?

A) Upon receipt of the application
B) After a medical examination
C) After underwriting approval
D) When the first premium is paid

Answer 1

The policy goes into effect when the first premium is paid.

Step-by-step explanation:

The policy goes into effect when the first premium is paid.

Insurance policies require the policyholder to pay a premium, which is the amount of money charged by the insurance company for providing coverage. The premium is typically paid on a regular basis, such as annually or monthly. Once the first premium is paid, the insurance policy takes effect and the policyholder is granted the coverage outlined in the policy agreement.

For example, if a person purchases a car insurance policy but has not yet paid the first premium, the policy would not be in effect. If the person gets into an accident before paying the premium, the insurance company would not provide coverage for the damages because the policy has not gone into effect.