Minnesota Life Insurance License Practice Exam

Generally, if the application is not prepaid, when is the effective date of the policy?

1. When the application is submitted

2. A producer delivered the policy and collected the premium

3. When the insurer approves the policy

4. At the end of the grace period

The correct answer is: A producer delivered the policy and collected the premium

The effective date of a life insurance policy is significant because it determines when coverage begins. In the scenario where the application is not prepaid, the policy's effective date is typically tied to when a producer delivers the policy to the insured and collects the premium. When the policy is delivered, the insurer depends on the insured's payment of the first premium to guarantee coverage. This is essential because without payment, there is no binding contract, and hence, the coverage cannot commence. Therefore, the moment a producer hands over the policy and receives the premium signifies the start of coverage. In contrast, other options either describe situations that do not align with policy activation or consider the implications of grace periods unrelated to initially setting the effective date.