What Does Conditional Receipt Mean?A conditional receipt is a document given to someone who applies for an insurance contract and has provided the initial premium payment. This receipt means that the person can only be insured if he or she meets the standards of insurability and is given approval by the insurance company. Show Insuranceopedia Explains Conditional ReceiptA conditional receipt is what an insurance company provides after a person submits his or her application for insurance and the first payment. This contract does not legally bind the company to cover the person, however. The person applying for insurance must prove that he or she is insurable by meeting certain requirements, such as passing a medical examination. Once the applicant has met those requirements, the insurance company will furnish a certificate of approval. This is the stage at which the company is ready to cover the person. The agent should be familiar with the types of receipts available and be able to explain the differences to the applicant at the time. There are two types of receipts: (1) The conditional receipt and (2) the binding receipt. The conditional receipt contains two subcategories as well: (1) Insurability and (2) approval. The insurance agent should collect the first full installment from the applicant at the time of application. The conditional receipt is the most common form of receipt, but it is not a full receipt. This means that the applicant and the company have formed what might be called a "conditional contract" - one contingent upon conditions that existed at the time of application or when a medical examination is completed. It provides that the applicant is covered immediately from the date of application as long as he or she passes the insurer's underwriting requirements. It is the producer's responsibility to explain that the applicant is covered on the condition that he or she proves to be insurable - and passes the medical examination, if required. A conditional receipt gives the company time to process the application and to issue or refuse the policy. If the applicant were to die before a policy is issued, the company will pay the death benefit but only if the policy would have been issued. There are also two different types of conditional receipts. Insurability Conditional ReceiptThe insurability conditional receipt is the type of receipt that is the most frequently used conditional receipt and is based on the condition that the applicant proves to be insurable. If the applicant is found to be insurable, the effective date of the policy is the date on the receipt (the date the initial premium payment was received). Even if it takes the insurance company as long as a month to process and deliver the policy, the effective date remains the date of the receipt. Approval ReceiptThe approval receipt states that the effective date of the policy is the date of approval, even before policy delivery. This type of receipt is rarely used today as they are not looked upon favorably by the courts.
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DefinitionConditional Binding Receipt — a receipt in life insurance that guarantees that if the risk is accepted, the named insured is insured from the date of issuance of the receipt. Related ProductsLife and Health
How does a conditional receipt differ from a binding receipt?The difference between a conditional binding receipt and a straightforward binding receipt is that a straightforward binding receipt requires the insurance company to pay the death benefit once the first premium gets paid, whether the applicant is ultimately approved or not. Conditional binding receipts are common.
What is conditional premium receipt?A conditional receipt is a document given to someone who applies for an insurance contract and has provided the initial premium payment. This receipt means that the person can only be insured if he or she meets the standards of insurability and is given approval by the insurance company.
What are the two types of premium receipts?There are two types of receipts: (1) The conditional receipt and (2) the binding receipt. The conditional receipt contains two subcategories as well: (1) Insurability and (2) approval. The insurance agent should collect the first full installment from the applicant at the time of application.
How is a conditional receipt best described?How is a conditional receipt BEST described? A receipt given to an applicant when an agent collects both the application and initial premium.
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What is a life insurance conditional receipt?
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