An applicant pays the first premium with the application and receives a conditional receipt. When does coverage become effective?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A conditional receipt provides coverage retroactive to the date of application if the applicant meets the insurer's insurability standards as applied for. The insurer must approve the application on the basis stated in the application; if it does, coverage relates back to the application date, so a death occurring between application and policy delivery is covered. If the applicant is not insurable at standard rates, the receipt does not bind the insurer. This retroactive protection is the essence of the conditional receipt and encourages prompt premium collection with the application.
Why the other options are wrong
- B) Coverage does not begin merely on issuance; the conditional receipt dates coverage back to the application only when insurability is confirmed.
- C) The free-look period is the post-delivery right to examine the policy, not the start of coverage.
- D) Coverage is never contingent on a later death claim; it is based on the application date and approval.
Memory hook
Conditional receipt = backdated shield: die after applying, and if approved, coverage started at the application date.