Montana State Life Insurance Practice Exam

If evidence of insurability is required, when does the coverage for credit insurance become effective?

1. When the premium is paid

2. On the date the insurance company deems evidence satisfactory

3. When the debtor requests it

4. After the creditor’s approval

The correct answer is: On the date the insurance company deems evidence satisfactory

The coverage for credit insurance becomes effective on the date the insurance company deems the evidence of insurability satisfactory because this process ensures that the insurer has assessed the applicant's health and risk factors appropriately before extending coverage. In credit insurance, it is critical for the insurance company to evaluate the debtor's insurability to determine if they qualify for the insurance policy. This requirement protects the insurer by allowing them to evaluate the risk associated with issuing a policy based on the debtor's health status. Only after this evaluation is completed and the insurer is satisfied can coverage commence, reflecting prudent underwriting practices. Coverage does not begin merely with the payment of the premium, nor does it activate based solely on a debtor's request or creditor's approval. Those elements are involved in the process but do not supersede the necessity for the insurer's acceptance of the evidence of insurability. Therefore, the effective date is directly linked to the insurer's assessment rather than other factors.