Arkansas Life and Health Insurance Practice Exam

When an applicant completes the application and submits it to the insurer along with a premium check, when is the applicant's offer considered accepted?

1. When the applicant submits the application

2. When the insurer receives the premium check

3. When the insurer issues a policy

4. When the application is reviewed for completeness

The correct answer is: When the applicant submits the application

The correct answer is A. When the applicant submits the application. In insurance contract law, the principle of acceptance dictates that an offer is considered accepted as soon as the applicant submits the application. This means that the insurer's acceptance of the offer occurs upon receiving the completed application, even before any premiums are paid or a policy is issued. This fundamental principle helps establish the effective date of coverage and the start of the insurance contract between the applicant and the insurer. Options B, C, and D are incorrect because the acceptance of the offer by the insurer actually happens when the applicant submits the application, not when the premium check is received, the policy is issued, or when the application is reviewed for completeness.