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A conditional binding receipt is a part of health, property, and life insurance contracts. If you are covered for certain circumstances by the insurer, the coverage will be provided to you on the date you receive the conditional binding receipt.
What is the conditional receipt?
A conditional receipt represents a document that provides insurance to a person who applies for an insurance contract and has provided the initial premium payment. It is used to provide insurance if the insured dies before the policy is issued.
Usually, If the insured would have been otherwise insurable in the case of the premature death, the insurance company would have to pay money.
What is the Purpose of a Conditional Receipt?
The primary purpose of a conditional receipt is to provide insurance to a person if the insured dies before the policy is issued. The main facts about conditional permits are:
- A conditional receipt is a part of the health, life, and various property insurance contracts.
- The coverage for an insured person commences by the date that the conditional binding receipt is received.
- If a health and life insurance policy does not have this receipt, the policy will be effective only when delivered to the insured and premium payment is received.
- The conditional binding receipt has two functions- an urgent receipt and a conditional receipt.
The process for this involves that the premium payment should be paid to the insurer along with an application filled as per the requirements; this will enable the insured a receipt that can be the proof of the payment. This receipt is also referred to as the ‘binding receipt’ or the ‘conditional receipt’ regarding the type of insurance.
Assessing conditional receipts closely
Suppose you have paid a premium with the application for coverage. In that case, a conditional binding receipt will mean that your coverage will be started from the date that you fill the application or pass the medical examination. This is because the insurer should have issued the range based on these criteria. In the case of a health or life insurance that does not have a conditional binding receipt will not be enforced unless the premium is paid.
Since the insured is to receive the policy in a certain future, the insurer needs to cover the claim even if it has occurred between the filing of the application and the policy being in effect. However, suppose an insured is not given the coverage based on distinctive circumstances, with the underwriting process on its way. In that case, the insurer holds the right to declare the conditional binding receipt as null and void, even though the insured might have submitted the premium.
The two functions of conditional binding receipts are as follows.
Binding receipts
Binding receipts means that your insurance policy will be in effect from the date the insurer receives the first premium payment. When the insured is deceased about disease or injury, etc., benefits will still be fully payable but attached with specific terms and conditions when the application is processed.
Conditional receipts
The conditional receipt is a general receipt that every insured needs to have. This receipt says that the insured and the insurance company have a conditional contract that ensures that the insured is set to get certain benefits in case of contingencies during the application filing and medical examination. It means that the insured are eligible to get the coverage if they comply with the insurer’s underwriting requirements. The insurance agent is obliged to inform that applicant that they will be covered only if they prove so and pass the medical examination if one is required.
This conditional receipt provides a time window for the insurance company to refuse or approve the policy. For example, if a life insurance policy was issued, and the insurer dies, the company will provide the death benefits as per the chosen policy.
Conclusion
Hence, the conditional binding receipt is necessary to prove for both the insurer and the insured for a policy that has been taken up. In addition, it helps to verify specific details in case of claims and simplifies the process of approving and refusing a coverage claim.
From 2022.,Jason writes educational insurance articles for Promtinsurance.com.
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