Tennessee Insurance Practice Exam

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Prepare for the Tennessee Insurance Exam with engaging flashcards and comprehensive multiple-choice questions. Understand hints and receive detailed explanations for each query. Ace your test with confidence!

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What happens to a life insurance application if the initial premium is not submitted with it?

The application is automatically denied
The insurer will issue the policy without a premium
The coverage becomes effective only after premium collection
The insurer processes it differently

The correct answer is: The coverage becomes effective only after premium collection

When a life insurance application is submitted without the initial premium, coverage typically does not become effective until the premium is collected. This is a standard practice in the insurance industry, as the initial premium payment secures the coverage and indicates the applicant's commitment to the policy. Until payment is received, the insurer has no obligation to provide coverage, and the application remains pending. In this scenario, the insurer's approach is to process the application with the understanding that a policy will only take effect once the premium is paid. This safeguards the company against issuing policies that are not financially supported by payment, ensuring a balance between customer coverage needs and the financial viability of the insurance provider.