In a scenario where a policy was issued as a substandard risk after a medical exam, when does coverage become effective?

In the context of a life insurance policy issued as a substandard risk, coverage typically becomes effective after the policy is delivered and the initial premium is paid. This process involves several steps to ensure that the insurer has assessed the risk accurately based on the medical exam and other relevant factors.

When a policy is issued as substandard, it indicates that the insurer has identified a higher-than-normal risk associated with the applicant, often resulting in higher premiums or specific exclusions. Since the terms of coverage can change based on this assessment, the effective date is tied to the delivery of the finalized policy documents, which reflects these terms. At this point, the policyholder is formally made aware of their coverage details and any modifications due to their health status.

In practice, the effective date is crucial as it establishes when the insurer is liable for claims. If the policy were to become effective solely upon application or examination, it could lead to misunderstandings about the coverage terms that were agreed upon post-examination. Thus, the necessity of delivering the policy and processing the premium ensures both parties are aligned on the coverage conditions under which the policy operates.