Life Insurance: When Does It Really Start?

As to when life insurance really begins, there are many factors to be taken into account, especially if certain benefits are to be effective while still under the maturity period. Well, let’s dig in deeper to what effective dates and other terminologies mean when talking about life insurance.

To be able to correctly define effective date, let’s get to know first other terminologies in insurance known as “offer and acceptance”. You should understand that when you applied for insurance, you have made agreements with your insurance company. That agreement is transformed into writing, thus it is now called a policy. Now, bear in mind that these policies are what both you and your insuring company agreed about. You “offered” these conditions, and your insurance company “accepted” it along with many additional conditions on their part. So basically, ‘to offer’ means to submit all completed application forms with signatures along with the cash out premium.  And ‘to accept’ means that your insurance company has agreed to cover your conditions, and will give you the appropriate approval of terms.

So what if you will not give initial cash out on the premiums? Will this still be in effect? As it is stated above, the acceptance can only happen once you pay the premium, hence if you don’t pay, then the application will be ineffective. What happens is the reversal of the offer and acceptance conditions. Your insurance company now will “offer” you certain policies that you need to “accept”, so that you will have your coverage. In most cases, this simple policy that insurance company offers is a rule that says your coverage will not start unless you pay the premium. So no matter how we try to reverse the issue, it still goes back to paying the premium.

So now, what do the offer and acceptance things have to do with effective date? If you have been reading this article carefully, you should have noticed that this question was answered a while ago. Your coverage will not start unless you pay the premium. Simple as it may seem, it gets more complex in cases like an early or sudden death occurs for the applicant. In normal cases, the effective date starts when the insurance company has received the premium, and confirmed that the applicant is in good condition. Having fulfilled all these conditions, the company will issue the corresponding policy, however, once an early death occurs before the premium was received, the bereaved family will not receive any form of financial support or claims from the insurance company. It is, therefore, recommended that once you apply, have the upfront fee paid right away.

After you have the paid the premium, a receipt will be issued to note that you have already paid. In most cases, this triggers the start of your effective date. However, in cases like no receipt was given, then the effective date will be moved to the date when the applicant will receive his policy. The delivery of these policies can vary and will be the basis for the effective date. This delivery can be either a manual delivery or a generated electronic mail delivery.