Montana State Life Insurance Practice Exam

What is required when an application is initiated through direct response solicitation?

1. A confirmation of the applicant's identity

2. A statement about whether the applicant intends to replace an existing policy

3. A payment for the first premium

4. A signature from a witness

The correct answer is: A statement about whether the applicant intends to replace an existing policy

When an application is initiated through direct response solicitation, it is necessary for the applicant to provide a statement about whether they intend to replace an existing policy. This is an important requirement in insurance applications, as it helps to ensure transparency and protect the applicant from potential negative consequences associated with replacing an existing policy. Replacement can lead to issues such as gaps in coverage or loss of benefits, so the insurer is required to obtain this information to properly assess the situation and guide the applicant accordingly. This component of the application process is designed to inform the applicant of the implications of replacing their current policy and to allow the insurer to fully understand the applicant's insurance needs. It also helps in maintaining compliance with regulations that govern insurance sales practices, which emphasize the importance of the consumer being fully informed before making significant financial decisions related to insurance products.