If the applicant is the prospective insured, which of the following statements concerning the insurability-type conditional receipt is correct?

• A. Coverage becomes effective when the policy is delivered.
• B. The applicant makes a conditional offer to the insurer.
• C. The applicant's insurability is determined in accordance with the general underwriting rules of the insurance company.
• D. The insurance company is never required to pay a death claim if the applicant dies before the application is acted upon.

Answer: (C)

In an insurability-type conditional receipt, whether the coverage becomes effective depends on the applicant meeting the insurer’s underwriting standards. The key idea is that insurability is evaluated under the insurer’s general underwriting rules, and only if the applicant is found insurable will the coverage take effect (often as of the application date or receipt, depending on policy terms).

That’s why the statement that the applicant’s insurability is determined in accordance with the general underwriting rules of the insurance company is the best choice. It captures that, with this type of receipt, coverage is not automatic or guaranteed just because the applicant applied or paid a premium; it hinges on meeting underwriting criteria.

The other options misstate how this receipt works: coverage isn’t automatically in force upon policy delivery, since under this receipt coverage is contingent on insurability; the applicant doesn’t make a conditional offer to the insurer—the insurer makes the underwriting decision; and saying the insurer is never required to pay a death claim if death occurs before the application is acted upon is too absolute, since payment depends on whether the applicant is later deemed insurable under the company’s underwriting.