Insurance Policy Delivery

Instructor: Deborah Schell

Deborah teaches college Accounting and has a master's degree in Educational Technology.

When you apply for insurance, there are number of steps between the application process and when your agent delivers your policy. In this lesson, you will learn about policy delivery.

What Is Insurance Policy Delivery?

Meet Sarah. She just applied for life insurance. Her agent called to let her know that her policy is ready for delivery and requested an appointment. Sarah isn't sure what will happen during this appointment and would like more information before she meets with her agent. Let's see if we can help Sarah with this problem.

When Sarah submitted her application to the insurance company, it reviewed the information and decided whether or not to approve her application. Now that the insurance company has approved it, her agent must deliver her policy to her. Policy delivery involves delivering the policy to the applicant and collecting any premium that is still outstanding.

Insurance companies have different requirements about how a policy can be delivered. For example, a policy may be delivered personally, by registered mail or by courier. If the policy is delivered personally, then the insurance company specifies that the agent must do so within a certain number of days after the date the policy is issued.

Steps in the Insurance Delivery Process

There are number of steps that an agent must complete during the delivery process, including:

  • Physically delivering the policy
  • Collecting the initial premium
  • Explaining the policy's provisions, riders as well as the rating
  • Verify the medical condition of the insured
  • Obtain a signed delivery receipt

Let's examine each of these steps in more detail.

Physically Delivering the Policy

Many insurance companies insist on physical delivery of the policy to the insured while some will permit delivery by registered mail or courier. Regardless of the method of delivery, the agent is responsible for ensuring she has obtained all of the delivery requirements from Sarah on a timely basis.

Collecting the Initial Premium

If Sarah did not include payment with her application, then her agent would collect the premium when she delivers Sarah's policy. Sarah's policy would not be effective until she pays the initial premium.

Explaining the Policy's Provisions, Riders and Rating

Sarah's agent must explain what the policy covers and any provisions attached to the policy. For example, her agent would explain to Sarah that her policy will not pay any death benefits if Sarah commits suicide within the first two years of the policy.

Sarah's agent must also explain any riders or benefits that were not part of the original contract. Riders can provide additional benefits or represent benefits that the insurance company has taken away from the original contract. For example, let's assume that Sarah applied for an accidental death benefit that would pay her beneficiary an additional sum of money in the event that she died accidentally. The agent would be required to explain how this rider works since it would not be part of a standard insurance contract.

Sarah's agent must also explain any rating applied to her contract. Let's assume that Sarah is in excellent health and her insurance company decided to offer her a preferred rating, which means her health is better than someone of the same age. As a result of this rating, Sarah would pay a lower premium than someone to whom the insurance company assigned a standard rating.

Verification of the Insured's Medical Condition

When an agent delivers the policy, she must verify that the insured's medical condition is consistent with its status at the time of application. Let's assume that Sarah's agent arrives to deliver her insurance policy and discovers that Sarah has recently been diagnosed with a serious medical condition. It is the agent's responsibility to notify the insurance company of this significant change and return the policy. The insurance company will examine Sarah's application again by completing the underwriting process.

Obtaining a Signed Delivery Receipt

A policy delivery receipt is written evidence that the insured received his/her insurance policy. A policy delivery receipt usually includes the following information:

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