Massachusetts State Life Insurance Practice Exam

Which type of receipt provides coverage from the date of application, regardless of insurability?

1. Conditional receipt

2. Binding receipt

3. Standard receipt

4. Temporary receipt

The correct answer is: Binding receipt

A binding receipt is a specific type of receipt that provides immediate coverage from the date the application is submitted, regardless of the applicant's insurability. This means that as soon as the applicant pays the premium and the insurance company issues the binding receipt, the coverage is effective even before the underwriting process is completed. This is a significant detail, as it establishes the intention of the insurer to provide coverage based solely on the application and the initial premium payment. Consequently, if something were to happen to the applicant after they receive the binding receipt but before the policy is formally issued, the insurer would still be obligated to honor the coverage. In contrast, a conditional receipt typically ties coverage to certain conditions being met, often related to the evaluation of the applicant's health status. A standard receipt does not initiate coverage and usually serves merely to acknowledge the receipt of the application and the premium. Similarly, a temporary receipt may imply coverage for a specific period but often comes with stipulations regarding insurability, meaning coverage might not be effective if the insurer determines the applicant is not insurable. Thus, the binding receipt distinctly stands out as providing full coverage from the moment of application submission without concerns about insurability.