Life & Health Insurance Practice Exam

What does a conditional policy depend on?

1. The payment of premiums

2. The occurrence of an event

3. The applicant's disclosure

4. The agent's authority

The correct answer is: The occurrence of an event

A conditional policy is one that requires the occurrence of a certain event or condition for coverage to become effective or for benefits to be paid. Typically, this type of policy is tied to specific circumstances such as the insured's health status, a specified event, or other triggering conditions outlined in the policy. For example, in life insurance, the payment of the death benefit may be conditional on the death of the insured occurring within the policy term. Similarly, in health insurance, benefits might hinge on the insured receiving treatment for a specific medical condition or meeting certain requirements stated in the policy. The other aspects mentioned, like the payment of premiums, while essential to keeping the policy active, do not determine the conditions of coverage. The applicant’s disclosure is crucial for underwriting but does not define the conditional nature of the policy itself. The agent's authority is related to their ability to act on behalf of the insurance company but is not a determining factor in the conditions attached to the policy. Therefore, the defining feature of a conditional policy is its reliance on the occurrence of a specific event or condition.