Introduction
In the insurance sector, a conditional binding receipt is a receipt which guarantees that the insurer has accepted the risk, and the insured party is deemed to be covered from the date on which the insured party receives the receipt. The conditional binding receipt is given to the insured party at the time of submitting the completed application form and paying the premium. It is used in life, health, and property-related contracts.
Understanding a Conditional Binding Receipt
A conditional binding receipt provides that the coverage will be in force from the date of the application, or the medical examination conducted in certain cases provided the policy is issued based on the facts disclosed in the application form.
Typically, an insurance policy will not come into force until the premium has been paid, and the receipt is delivered to the insured party. The insurance company usually has a time period in which they can issue or refuse the policy. If the insurance policy is issued anyway, then the insurance company is liable to cover the claim.
A conditional binding receipt becomes effective if a claim occurs between the time the application is received, and the policy is allotted.
If the insured party is denied coverage in the time period between which the application form is received, and the policy is in place, the insurance company can nullify the conditional binding receipt. This can take place even if a premium has already been collected.
A completed application form, along with the premium payment, is required for a conditional binding receipt to be issued. Typically, the coverage date for the receipt to be in force is the date of the application.
Importance of a Conditional Binding Receipt
The conditional binding receipt gives the insurance company some time to accept or reject the policy. For the insured party, it gives them coverage in the event of death or any other mishap happening before the application is processed, and the policy is issued.
