Binding Receipt
A receipt making coverage effective immediately upon application and premium payment, before underwriting, regardless of whether the insurer later finds the applicant insurable.
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Practice This Concept
An applicant for life insurance is told by an agent that the moment the application is signed, a "binding receipt" provides immediate coverage pending underwriting. This statement is:
Incorrect, because binding receipts are not used for life or disability insurance in California — In California, life and disability insurers are prohibited from using binders or binding receipts; temporary coverage pending underwriting is provided through a conditional receipt. Under a conditional receipt, coverage begins when the insurer approves the application and the applicant was insurable on the date of application or medical exam. Because coverage is conditional on insurability and approval, the agent's statement about an immediate binding receipt is wrong. Binding receipts belong to property and casualty insurance, not life insurance.
CA-specific example
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