Life Insurance – Effective / Commencement Date Of Coverage

An insured in Grand Prairie, Dallas, Fort Worth, Coppell, Richardson, Duncanville, Aledo, Arlington, or anywhere else in Texas may ask this question: When does the life insurance policy become effective? Here is some guidance.
Most life insurance policies expressly state the “effective date” of coverage. This date may be earlier than, or later than, the date the first premium is paid or the dates the policy is issued or delivered. Often, an insurance policy may have an effective date, an issue date, and a policy date — and they may all be different, causing confusion or misunderstanding. If the dates differ, disputes may arise over when the policy actually took effect or terminated. The effective date can be important in setting the due date for subsequent premiums and thus the date of any lapse for failure to pay a premium.
An example to think about is found in the case, Life Insurance Company of the Southwest v. Overstreet. This is a Texas Supreme Court case decided in 1980. Here is a brief summary of the case:
A life insurance policy provided that its effective date was March 15th and each annual premium was due on the anniversary of that date. The insured did not pay his first premium until April 18th. Two years later, the insured died while his premium was due. If the effective date was measured from March 15th, he died outside the grace period and had no coverage. If measured from April 18th, he died within the grace period, and within coverage. The Supreme Court held there was no coverage, following the majority rule that “a definite statement in the policy of the date on which annual premiums will be due is the due date. Such a statement of the due date controls even over a provision stating that a policy will not be in force until it is initially delivered and the first premium is paid during the good health of the insured.”
Interpretation of contract law as it relates to life insurance policies, and effective dates, premium dates, issued dates, delivery dates, inception dates, etc., make it necessary for an insured to consult with an experienced Insurance Law Attorney whenever they are dealing with an insurance company on a life insurance claim.
The next question is: What happens when there is death or change in health before the effective date?
The Texas Supreme Court, said in 1950, “If the insured dies before the policy becomes effective, there is no coverage.”
The Texas Supreme Court, said in 1979, that a policy may also contain a “good health” clause that requires that the insured be in good health at the time the policy is issued or the coverage will not take effect. That court and the Court of Appeals, Amarillo, has said, “A good health clause renders the policy void if the insured was not in good health.” In contrast, a false representation of good health provides a defense only if other elements, such as intent to deceive, are proved.
Another question that comes up is: When does coverage terminate? This answer can be discussed with an experienced Insurance Law Attorney.