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Why do insurance agents ask for a check at the first appointment?

by 11/10/2011

During my training to become a life insurance agent, I had been told over and over again about the importance of getting the first month’s premium and the “conditional receipt”. The conditional receipt, in a nut shell, is a contract between the insurance company and someone who is applying for insurance. As long as the person applying for the insurance is honest and accurate when answering the medical questions and takes the medical exam, they are covered in the event of an unexpected death. This, of course, assumes that the insured person would have normally qualified for the insurance had death not occurred.

I, like many other agents, sat through my training classes thinking ok let’s get on with this meeting. I have things to do. Until, one day, my outlook really changed. On October 8th, I went to the home of a perspective client who was looking for Mortgage Protection. They walked me into their home through the garage, past a brand new green motorcycle. Throughout the evening, we discussed how the coverage would work and what it would cover. Ultimately, they decided on covering half of the mortgage on each spouse, providing enough coverage that if they both passed away, there would be enough to pay off the house leaving it free and clear for their teenage children.

On October 18th, our receptionist asked over the intercom if anyone has a client named ‘John Smith’. On the phone is the brother of John Smith, explaining to me that John and his wife Sally had been in a tragic motorcycle accident and that Sally had been killed instantly and John was in critical condition. I thought to myself “Oh man they aren’t even approved yet!” I cannot put into words the feeling I had as I reviewed in my head if I had done everything correctly while filling out their application.

A few days later, I was able to personally visit John in the hospital. He had survived and would recover enough to get around in a wheelchair for the rest of his life. I will never forget the statement and question he asked me as I walked into the room. He said “I will never ride another motorcycle again. All I want to do is repair medical equipment and be a Hartford Life client. We are insured by them right?”

I am happy to say that I had filled out the application correctly and they had given me a deposit for the first month’s premium, binding their insurance with a conditional receipt. This client received a death benefit check for $115,000.00. Those funds provide enough money to pay off half of the house, allowing him to refinance the remainder in order for them to keep the home.

Several months later, John called me and informed me that he had received another check from the insurance company. It was for $40.00 and he did not know what it was for. After a bit of research I discovered that the last check was a refund of the wife’s portion of the initial deposit. That is right, not only did they pay the claim at the time of her death because of the conditional receipt but they refunded the initial premium because they did not have an approved policy in force at the time of death. They could not legally keep the premium. In all actuality this couple never even paid for the insurance at all.

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