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9
Chapter Outline
Submitting an application for life insurance and payment of the initial premium for the insurance policy are the fundamental acts required of the policy- owner to create a life insurance contract. In legal terms these acts constitute the consideration paid by the applicant/policyowner in exchange for the insurer�s promise to pay the benefits described in the contract. Without this consideration a life insurance contract cannot exist. The face page of one insurer�s policy recognizes this requirement very explicitly: "The consideration for this policy is the application and payment of the total initial premium on or before policy delivery."
In addition to this policy provision, the consideration requirement is recognized in the language printed on the application forms of many life insurance companies in different ways. The following are several examples:
You understand and agree that the information provided in this application is the basis for and becomes part of any insurance issued as a result of this application. No insurance requested in this application will be effective until a policy is issued and we have received the balance of any premiums owed, except as provided in the temporary life insurance agreement numbered the same as this application.
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The insurance provided for in this application shall not take effect until this application has been approved by us, and the policy has been delivered to and accepted by you, and the full first premium has been paid while the insured is alive and while the health and insurability of the insured has not changed from that as described in the application.
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You agree that the application is the basis for issuing the policy and that except as provided in the conditional receipt, insurance does not take effect until you pay the full first premium and the policy is delivered while the insured is insurable under our underwriting rules.
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I agree that except as provided in the receipt, the insurance applied for never takes effect unless, during the lifetime of the insured, the policy has been issued, delivered to and accepted by me, and the required first premium has been paid while the health and habits of the insured remain as stated in the application.
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If a conditional life insurance agreement was delivered in consideration of the payment of the first premium and is in effect, its provisions and terms will apply. Otherwise, this policy will take effect and coverage will begin on the issue date specified in the policy if the full first premium is paid and the insured is living and the answers and statements in the application continue to be true at the time of delivery of the policy.
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