What is a Conditional Receipt?
A Conditional Receipt is a document provided by a life insurance company when an applicant submits an application and the initial premium payment. This receipt offers temporary coverage based on specific conditions, such as the applicant’s health and insurability at the time of application. If these conditions are met, the coverage becomes effective as of the date of the receipt or medical exam, even if the underwriting process is not yet complete.
The Conditional Receipt is significant because it can offer peace of mind to the applicant, ensuring some level of coverage during the underwriting period. For example, if the applicant passes away before the policy is formally issued, the insurer may still pay the death benefit, provided the applicant would have qualified for the policy under standard underwriting guidelines.
However, this coverage is conditional, meaning that if the applicant does not meet the insurer’s requirements for the policy, the temporary coverage may not apply, and the application could be declined. This makes it crucial for applicants to provide accurate and complete information during the application process to avoid complications with the conditional coverage.