General Insurance PrinciplesQuestion 202 of 716
An applicant submits a completed application with the initial premium. The insurer issues a policy with a different premium class than requested. Under contract law, this is BEST described as:
a.A counter-offer that the applicant must accept before a contract is formed
b.A void policy, because the parties never reached a genuine meeting of the minds
c.An automatically binding contract effective on the date the policy is issued
d.An unqualified acceptance of the applicant's original written offer
Explanation
When an insurer issues a policy materially different from the one applied for, the issuance is a counter-offer rather than an acceptance. No contract exists until the applicant accepts the counter-offer, typically by paying the modified premium and taking delivery.
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PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)