State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Regarding life insurance coverage in California, which statement about binders is correct?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
In California, life insurance cannot be bound by an oral binder the way property and casualty coverage can. There is no 'binder' for life or disability insurance; temporary coverage is available only through a conditional receipt, which makes coverage effective only if the applicant pays the initial premium and is found insurable as applied for. The policy itself becomes effective on delivery and acceptance. This rule protects both the insurer and the applicant by making coverage depend on underwriting rather than on an agent's verbal assurance.
Why the other options are wrong
- A) A binder, where used, is temporary protection pending issuance of a policy; it is not permanent coverage for life.
- C) For life insurance a binding receipt is not available; the conditional receipt imposes conditions such as premium payment and insurability before coverage attaches.
- D) There is no rule requiring oral binders for short-term life transactions; binders are generally barred for life coverage.
Memory hook
No oral binder for life — only a conditional receipt can create temporary coverage.