Can an insurance co. cash a check for premiums before you are even approved or receive a policy?

Posted in Life Insurance Questions over 2 years ago, 1 reply

My husband and I are in the process of applying for a "second to die" life insurance policy. We were asked to submit a check worth 3 months of premiums with the application. We thought they were going to hold it until we were issued a policy but they cashed it last week and we just submitted the application last week. Is this customary? Should we be asking questions? What are they using our premium dollars for at this point?

submitted by Margaret in Hartford, CT

When you open a life insurance policy, it is issued and bound the day you sign the application, which means you are covered on day 1 that you apply. This is only the case when you pay a premium with the application which most companies require unless there are age or health factors that they do not want to bind on day 1.
The company cashed the check because it was actually a premium payment for the issue date of the application date. You may want to look again at your application paperwork and you should find a page that shows what is called a "Temporary Insurance Agreement" or TIA, which actually serves as your policy until the actual policy is issued.
In other words, you should be covered by the company now and if you were to both pass (since it is a second to die), benefit would be paid if the company does not find out that you were uninsurable.
So, short of it is to not be concerned about the check being cashed, there would be concern if it had not been cashed.

David J Horsey Jr., CLTC
Clearview Insurance & Financial Services
dhorsey@myclearview.com

submitted by David Horsey in Springfield, MO @ February 09, 2009 - 04:00 PM

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