Texas Life Agent Practice Exam

What is the recommended action when an application for life insurance has been signed but lacks the initial premium payment?

1. The insurance company must process it anyway

2. The producer should wait until payment is received

3. The policy should be issued without the payment

4. The application should be returned to the applicant

The correct answer is: The producer should wait until payment is received

When an application for life insurance is signed but does not include the initial premium payment, the most appropriate course of action involves waiting until payment is received. This practice aligns with insurance underwriting guidelines, which typically stipulate that the initial premium must be collected before the policy becomes effective. Processing the application without payment could lead to coverage being issued without appropriate corresponding funds, which could expose the insurer to unnecessary risk. It’s essential for the producer to ensure that the premium is collected to guarantee that the policy can remain in force and to maintain the financial integrity of the insurance operation. Hence, waiting for the receipt of payment before proceeding is the prudent choice in this scenario.