Policy Delivery
Policy delivery is the final step in the insurance application process. Proper policy delivery ensures the insured understands their coverage and that all conditions for coverage have been met.
The Policy Delivery Process
Policy delivery involves more than simply handing over the policy document. It includes verification, explanation, and documentation.
Steps in Policy Delivery
| Step | Description |
|---|---|
| 1. Receive policy from insurer | Agent receives approved policy and delivery instructions |
| 2. Schedule delivery | Arrange meeting with policy owner (and insured if different) |
| 3. Collect premium | If not already paid with application |
| 4. Statement of good health | Obtain certification that insured's health hasn't changed |
| 5. Deliver policy | Present policy document and explain key provisions |
| 6. Obtain delivery receipt | Have policy owner sign acknowledgment of receipt |
| 7. Return documentation | Submit signed documents to insurer |
Conditional Receipts
When applicants pay the initial premium with their application, they typically receive a conditional receipt that provides temporary coverage under certain conditions.
Types of Conditional Receipts
| Receipt Type | Coverage Begins When |
|---|---|
| Insurability conditional receipt | The date of application OR medical exam (whichever is later), IF the applicant is found insurable as applied for |
| Approval conditional receipt | Only when the policy is approved by the insurer |
Insurability Conditional Receipt (Most Common)
The insurability conditional receipt is the most commonly used type:
| If Applicant Is... | Coverage Effect |
|---|---|
| Found insurable as applied for | Coverage backdates to application or exam date |
| Found insurable at a different rate | No retroactive coverage under the receipt |
| Found uninsurable | No coverage—premium refunded |
| Dies before decision while meeting conditions | Death benefit payable |
Example: Insurability Receipt
An applicant pays the initial premium and receives an insurability conditional receipt dated October 1. The medical exam occurs on October 5. The underwriter approves the policy on October 25.
Result: Coverage effective date is October 5 (the later of application or exam date), because the applicant was found insurable as applied for.
Example: Death During Underwriting
Same scenario, but the applicant dies on October 15 (before approval). If the underwriter determines the applicant WOULD have been approved as applied for, the death benefit is payable. If the applicant would not have qualified, no benefit is paid and the premium is refunded.
Exam Tip: The key distinction is "as applied for"—if the applicant would only have been approved at a rated class or declined, the conditional receipt does not provide coverage.
Statement of Good Health
A statement of good health (also called a health certification) is typically required at policy delivery.
Purpose of the Statement
| Purpose | Description |
|---|---|
| Verify health status | Confirm no changes since application |
| Protect insurer | Ensure applicant still qualifies for coverage |
| Complete contract | Satisfy conditions for coverage to begin |
What the Statement Confirms
The policy owner/insured typically certifies:
- No changes in health since the application
- No new illnesses, injuries, or medical conditions
- No new physician visits, diagnoses, or treatments
- No changes in occupation or activities
If Health Has Changed
| Situation | Action Required |
|---|---|
| Minor change | Agent may note and proceed; insurer determines impact |
| Significant change | Agent must report to insurer before delivery |
| Applicant now uninsurable | Policy may not be delivered; underwriting reconsideration required |
Collecting the Initial Premium
If the initial premium was not paid with the application, it must be collected at policy delivery.
Premium Collection at Delivery
| Scenario | Coverage Begins |
|---|---|
| Premium paid with application | According to conditional receipt terms |
| Premium paid at delivery | Upon delivery with signed statement of good health |
| Premium not paid | No coverage until premium received |
First Premium Payment Rules
- Cash or check: Preferred methods
- Postdated checks: Generally not acceptable
- Credit card: Acceptable with proper authorization
- Agent payment: Agent cannot pay premium for applicant (constitutes rebating)
Policy Delivery Requirements
What Must Be Delivered
| Item | Requirement |
|---|---|
| Policy document | Original policy must be delivered |
| Riders and endorsements | All attached riders must be included and explained |
| Free look notice | Information about the right to cancel |
| Buyer's guide | Required in many states for life insurance |
| Illustrations | If used in sales, must be provided |
Explanation Requirements
Agents should explain:
- Death benefit and how it works
- Premium amount and payment schedule
- Beneficiary designations
- Cash value provisions (if applicable)
- Policy loan provisions (if applicable)
- Free look period rights
- Important riders and their benefits
The Free Look Period
The free look period (also called right to examine) gives the policy owner time to review the policy and return it for a full refund if unsatisfied.
Free Look Period Details
| Aspect | Typical Terms |
|---|---|
| Duration | 10-30 days (varies by state and product) |
| Starting point | Date of policy delivery |
| Refund | Full premium returned if canceled within period |
| Effect | Policy considered never issued if returned |
Extended Free Look
Some products have longer free look periods:
- Replacement policies: Often 30 days
- Annuities: Often 10-30 days
- Senior policies: May have extended periods (e.g., 30 days for ages 60+)
Delivery Receipt
A delivery receipt documents that the policy was properly delivered and key conditions were met.
What the Delivery Receipt Documents
| Element | Information Recorded |
|---|---|
| Date of delivery | Establishes when coverage and free look begin |
| Premium collected | Amount and method of payment |
| Statement of health | Confirmation that health hasn't changed |
| Policy owner signature | Acknowledgment of receipt |
| Agent signature | Confirms proper delivery procedures followed |
Key Takeaways
- Policy delivery is the final step before coverage becomes effective
- Conditional receipts provide temporary coverage when premium is paid with application
- Insurability conditional receipts backdate coverage IF the applicant is approved as applied for
- A statement of good health confirms no changes in health since application
- The free look period (typically 10-30 days) allows return of policy for full refund
- Delivery receipts document proper policy delivery and premium collection
- If the applicant's health has significantly changed, the agent must report to the insurer before delivery
An insurability conditional receipt provides coverage:
At policy delivery, a statement of good health is used to:
The free look period typically:
If an applicant who paid premium and received an insurability conditional receipt dies before underwriting is complete, the death benefit will be paid if: