State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
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:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
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.
Why the other options are wrong
- B) Paying the first premium secures a conditional receipt, not a binding one; coverage is still subject to approval and insurability.
- C) The 30-day window is irrelevant; no binding receipt exists in life insurance regardless of when the policy is issued.
- D) The issue is the type of receipt, not who issues it; conditional receipts are the proper instrument in life insurance.
Memory hook
Life has conditional receipts, not binding ones — coverage is approved and insurable, not instant.