Illinois Life Producer State-designated Practice Exam

In order for a producer to legally cancel a policy within 90 days, what action must be taken regarding fees?

1. Provide a full refund immediately

2. Refund a prorated portion within 30 days

3. Notify the insurer within 60 days

4. Require the policyholder to pay a cancellation fee

The correct answer is: Refund a prorated portion within 30 days

In the context of insurance policies, particularly for life insurance in Illinois, the correct action regarding fees when canceling a policy within 90 days is to refund a prorated portion within 30 days. This means that if a producer decides to cancel the policy, they must ensure that the policyholder receives back a portion of the premium that corresponds to the unused portion of the coverage period. The prorated refund is designed to protect the consumer's financial interests, ensuring they are not penalized for canceling a policy they no longer wish to maintain. By requiring the refund to be issued within 30 days, it establishes a clear timeline for the insurer to comply, enhancing transparency and fairness in the cancellation process. This approach reflects principles of equitable treatment for policyholders, reinforcing the idea that they should not be obligated to pay for coverage that they are no longer receiving.