New Jersey Life Insurance Exam Practice Question
A life insurance policy MOST often becomes effective when the
Correct Answer: B
Rationale: A life insurance policy typically becomes effective when the premium is collected and the policy is issued. This ensures that the insurer has received payment and formally accepted the risk, establishing coverage.
Option A is incorrect because simply submitting an application does not guarantee coverage; underwriting must occur first. Option C is misleading, as an agreement on coverage does not create a binding contract without premium payment. Option D, while close, overlooks that the policy must be issued after the premium is received for coverage to be active. Thus, option B accurately reflects the necessary steps for the policy's effectiveness.
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