Arkansas Life and Health Insurance Practice Exam

Which provision states that the insurance company must pay claims immediately?

1. Grace Period

2. Incontestability

3. Legal Actions

4. Time of Payment of Claims

The correct answer is: Grace Period

In this case, the correct answer is A. Grace Period. The grace period provision in an insurance policy allows the policyholder to make premium payments after the due date without losing coverage. It is important because it gives the policyholder a buffer period to make late payments without the policy being canceled. This provision does not directly state that the insurance company must pay claims immediately, but it does pertain to the timing of premium payments. Options B, C, and D are not directly related to the immediate payment of claims. Incontestability pertains to the insurer's inability to contest the policy after a certain period of time has passed. Legal Actions refer to the policyholder's right to take legal action against the insurance company if necessary. Time of Payment of Claims relates to the time frame within which the insurance company must pay out a claim once it has been submitted.