23-3. Timing of Insurance Coverage. On October 10, Joleen Vora applied for a $50

Question

23-3. Timing of Insurance Coverage. On October 10, Joleen Vora applied for a $50,000 life insurance policy with Magnum Life Insurance Co. She named her husband, Jay, as the benef- ciary. Joleen paid the insurance company the first year's pre- mium on making the application. Two days later, before she had a chance to take the physical examination required by the insurance company and before the policy was issued, Joleen was killed in an automobile accident. Jay submitted a claim to the insurance company for $50,000. Can Jay collect? Explain. (See Insurance.)

Explanation / Answer

Parties in the insurance agreement may agree that a life insurance policy will be binding

-at the time the insured pays the first premium, or

-the policy may be expressly contingent on the applicant's passing a physicalexamination.

In the first case, Jay can get the claim as first premium is paid.

In the second case, Joleen paid premium but dies before having the physical examination. In this case, the applicant's estate need to show that the applicant would have passed the examination had he or she not died.

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