What occurs if the premium is not paid with the application?

When the premium is not paid with the application, coverage cannot begin until the premium is collected. This is because insurance companies typically require the initial premium payment to activate the policy. Without receiving the premium, the insurer has not accepted the risk. Therefore, it is essential that the producer collects the premium prior to the issuance of the policy to ensure that the applicant receives coverage as expected. Ensuring this payment is collected before coverage starts is a standard industry practice to avoid any disputes over the policy's validity.

Other options suggest scenarios that do not align with how insurance underwriting and premium collection processes typically function. For instance, automatically issuing a policy without payment would expose the insurer to financial risk, while refunding an application would imply that a transaction took place that could be reversed, and voiding the application doesn't adequately address the necessary step of premium collection before coverage starts.