Updated on October 4, 2023
The term conditional receipt is part of an insurance contract. The meaning of this term and related details are mentioned below.
Defining Conditional Receipt
A Conditional Receipt is a document provided by an insurance company to a policy applicant when they submit an application for insurance coverage along with the initial premium payment. This receipt serves as evidence that the applicant has initiated the process of obtaining insurance coverage, but it also includes conditions or contingencies that must be met for the coverage to become effective. In essence, it acts as a temporary acknowledgement of the insurance application and payment, pending the insurer’s underwriting approval.
What are the types of conditional receipts?
There are two main types of Conditional Receipts:
Binding Receipts – A binding receipt provides immediate coverage from the date of application and premium payment, as long as the applicant meets the insurer’s conditions. If the applicant later fails to meet these conditions, coverage may be voided or adjusted.
Non-Binding Receipt – A non-binding receipt acknowledges the application and payment but does not provide immediate coverage. Coverage only becomes effective after the insurer’s underwriting process is complete, and all conditions are met.