Ethics Contract Formation, Disclosure & Provisions question: diagnosed with a serious heart condition

EthicsContract Formation, Disclosure & Provisions

Hana completed an application for $400,000 of term life insurance on 2 June and paid nothing with it. The policy was issued on the terms she applied for and mailed to her agent on 20 June. Before the agent delivered it, Hana was diagnosed with a serious heart condition. The agent then delivered the policy and collected the first premium. Is the contract in force?

A Yes, because the agent collected the first premium on delivery
B Yes, because the policy was issued exactly as applied for
C No, because a contract only takes effect on the policy date shown in the policy
D No, because her insurability changed before the policy was delivered

Show the answer and explanation

Answer: D. No, because her insurability changed before the policy was delivered

Unless the application or policy says otherwise, a life contract takes effect only when the policy is delivered, the first premium is paid and there has been no change in the insurability of the life insured between completing the application and delivery. Hana's diagnosis is a change in insurability, so the delivery and payment do not put the contract in force. Collecting the premium does not cure the change; the agent should not have delivered the policy. Source: Insurance Act (BC), RSBC 2012, c. 1, s. 48(1) (current to 6 Oct 2026; as at 12 Oct 2026); the other common-law provinces' Insurance Acts have the same uniform provision.

Common mistake

Treating delivery plus premium as enough, and forgetting the third condition: no change in insurability.

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Related Ethics practice questions

Insurer X issued Owen's policy on the terms he applied for and sent it to his agent for unconditional delivery. Owen had already paid the first premium with his application, and his health had not changed. Owen died in a car accident before the agent handed him the policy. What is the insurer's position?Ravi, 49, of Brandon, bought a $500,000 life policy last year after completing a written medical questionnaire. He is now refinancing his business and his lender wants to see the full contract. Ravi writes directly to the insurer asking for a copy of the entire contract and of the written medical answers he gave as evidence of insurability. It is his first such request. What must the insurer do?Jerome has been a licensed life agent in Winnipeg for six years. A new client, Viktor, 52, owns two restaurants and wants a single-premium non-registered universal life policy to leave money to his nephew. At their second meeting Viktor hands Jerome $12,000 in Canadian bank notes for the premium, saying his business deals mostly in cash. No exception under the regulations applies. What must happen under the federal anti-money-laundering rules?

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Original study material mapped to the public CISRO curriculum; not a real test question.Not affiliated with CISRO, CCIR or any provincial insurance regulator. Verify figures and rules against current guidance before relying on them.