What is the purpose of a conditional receipt?

A conditional receipt is a document that serves as temporary proof of insurance coverage until the insurance company completes its review of the policy application and decides whether to issue a final policy.

The purpose of a conditional receipt is to protect the policyholder in case of loss before the insurance application is fully reviewed and accepted. If the insured suffers a loss during the period of coverage provided by the conditional receipt, the insurance company is obligated to provide coverage up to the limit specified in the receipt, assuming that the policy is eventually approved.

Conditional receipts are commonly utilized in life insurance and property insurance applications, where a delay in underwriting may occur. They provide peace of mind to the insured that they have some level of protection while the application is being processed.

It is important for the insured to carefully read and understand the terms of the conditional receipt, including the coverage limits and the conditions under which coverage may be denied. It is also essential to follow up with the insurance company to ensure that the final policy is issued as expected.