Certified Financial Consultant (CFC) Practice Exam

When is an offer usually made in insurance?

1. Upon contract negotiation

2. When the premium is paid

3. When the application is submitted

4. After a risk assessment

The correct answer is: When the application is submitted

An offer in insurance is typically made when the application is submitted by the applicant. At this stage, the applicant expresses their intention to enter into a contract with the insurance company by providing relevant personal and risk-related information. This submission represents a formal request for coverage and signifies the beginning of the underwriting process. Once the application is received, the insurer reviews the details provided and assesses the risk associated with insuring the applicant. Only after this evaluation can the insurer decide whether to accept the offer and issue a policy, which may involve determining the appropriate premium based on the risks presented in the application. The other options relate to different stages of the insurance process but do not define when an offer is made. For instance, contract negotiation may occur after the application has been submitted and before the policy is issued, but it does not constitute the initial offer itself. Paying the premium is typically a step that follows the acceptance of the offer, and it indicates agreement to the terms of the policy but does not itself constitute the offer's creation. Similarly, risk assessment is an evaluative process that occurs after the application submission, further confirming the terms of the offer but not initiating it.