Minnesota Life Insurance License Practice Exam

When does coverage become effective if the initial premium is paid at the application time?

1. The day the policy is delivered

2. The day after application review

3. The date listed on the contract

4. The date of the application submission

The correct answer is: The date of the application submission

Coverage typically becomes effective on the date of the application submission if the initial premium is paid at that time. This principle allows individuals to have immediate protection once they express their intent to purchase the policy and fulfill the requirement of paying the initial premium. It emphasizes the importance of completing both steps—submitting the application and paying the premium—for the coverage to start without delay. Other choices reflect different situations. Coverage being effective on the day the policy is delivered might occur in some contexts, especially if the delivery signifies acceptance of the terms; however, that is not the case when the initial premium is paid at application. The day after application review usually applies when the underwriting process needs to be completed, while the date listed on the contract often pertains to situations where the policy is issued later than the application date. Therefore, ensuring that the effective date aligns with the initial payment and application submission provides clarity and immediacy for the policyholder.