What is the next step the insurance company will take after an agent collects a premium and issues a conditional receipt for an individual Disability Income application?

The correct next step for the insurance company after an agent collects a premium and issues a conditional receipt for an individual Disability Income application is to determine if the applicant is an acceptable risk by completing standard underwriting procedures.

This process is critical because it evaluates the applicant's health status, lifestyle, occupation, and other risk factors to assess whether the insurance company is willing to provide coverage. Underwriting helps the insurer make informed decisions about policy issuance based on the likelihood of future claims. The conditional receipt indicates that coverage may begin while the application is being processed, but the policy is not finalized until underwriting is complete and the application has been approved.

Other options like immediately issuing a policy or initiating a claims process do not follow standard industry practices. A policy cannot be issued without first determining the applicant’s risk level, and claims are only processed for existing policies rather than potential future claims based on applications. Similarly, refunding the premium if the application is declined is not the immediate next step, as the underwriting process must first be completed to make that determination.