Arkansas Life and Health Insurance Practice Exam

What is a consequence of not collecting the premium when an application is completed?

1. The producer loses their commission

2. The applicant receives temporary coverage

3. The policy remains inactive until premium is paid

4. The insurer assumes the risk until payment is made

The correct answer is: The policy remains inactive until premium is paid

If the premium is not collected when an application is completed, the policy will remain inactive until the premium is paid. It is important for the premium to be paid in order for the policy to become active and the coverage to take effect. Option A is incorrect because the producer losing their commission is a consequence for the producer rather than the policy. Option B is not accurate because the applicant receiving temporary coverage without paying the premium is not a common practice in insurance. Option D is not correct because the insurer does not assume the risk until payment is made.