Conditional vs Binding Receipt
A conditional receipt starts coverage only if the applicant proves insurable as applied for, dating back to application. A binding receipt covers immediately on application and premium, regardless of later underwriting.
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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