What is a "conditional receipt" in the context of insurance?

A "conditional receipt" serves a specific function in the insurance application process. It is a document provided to an applicant upon the submission of an application and payment of the initial premium, but it stipulates that the insurance coverage will only begin if the insurer ultimately approves the application based on their underwriting criteria.

In this context, it emphasizes the condition that the applicant must meet the insurer's requirements for the policy to be issued. The policy may not be effective at the moment the receipt is issued, highlighting that the applicant's risk status is not assessed until underwriting completes its evaluation.

This concept is crucial because it distinguishes conditional receipts from other types of receipts that may suggest immediate coverage or simply acknowledge the application process without any caveats. Other receipts may indicate general processing or proof of payment, but they do not convey the specific condition associated with approval that the conditional receipt does.