May 13, 2022
  • May 13, 2022

What is conditional receipt life insurance? • Benzinga

By on February 4, 2022 0

Are you looking for the best rate and the best coverage? Compare life insurance plans and quotes side by side on Policygenius.

Some life insurance options, like many term life insurance policies, don’t take long to let you know if you’re approved or not. Others, like the instant problem, let you know almost immediately.

But whole life and universal life policies can take six to eight weeks to communicate approval. Conditional life insurance can provide you with coverage between the time of your application and its approval. Learn more about conditional receipt life insurance now.

What is conditional receipt life insurance?

Contingent receipt life insurance gives an insurance company an opening in which it can ultimately approve or deny an applicant’s coverage. If the applicant should happen to die within this time between application and approval, the insurance company will pay the death benefit.

If you die between the time of application and the time of approval, conditional receipt life insurance will honor the death benefit. However, it will only pay if your application is approved. If you die during this period and your policy is ultimately declined, the insurance company is not required to pay the death benefit.

Since you make payment at the time of application, you are technically insured as soon as you sign on the dotted line and hand a check to your insurance agent. But what if your policy is ultimately declined? If you die between contract signing and final approval, your insurance policy will pay the death benefit. But that’s only if you’re approved.

Conditional receipts are common. It is the responsibility of the insurance agent to inform the applicant of conditional coverage.

The binding conditional receipt

A conditional receipt is a receipt given to an applicant after they sign their application and pay their first premium. This means that the insurance policy is now in force. If the policyholder should die before the policy is fully processed, the insurance company must pay the death benefit, but only if the policyholder is ultimately approved for coverage.

The binding conditional receipt is what holds the insurer responsible for the terms of the insurance policy. This binding instrument is what forms the conditional contract between the insurer and the insured.

The reason for a conditional binding receipt is to ensure that the claimant has protection during the period between their first premium payment and final approval. Since this process can sometimes take up to eight weeks, the time between application and approval requires coverage.

While this process exists to protect the claimant, it also serves to protect the insurance company. If the claimant is ultimately denied coverage, the insurance company will not be held responsible for paying the death benefit.

The conditional receipt should not be confused with a simple receipt as the receipt is unconditional. With a binding receipt, the insurance company is responsible for paying the death benefit whether or not the claimant is ultimately approved.

BZ

Key points

  • A conditional binding receipt is a conditional contract between the insurer and a claimant.
  • The receipt protects both the claimant and the insurer during the normal processing time of the claim.
  • Conditional binding receipts pay death benefits when the applicant would have been approved and not if the applicant would have been denied.
  • The difference between a Conditional Binding Receipt and a Simple Binding Receipt is that a Simple Binding Receipt obligates the insurance company to pay the death benefit after the first premium is paid, whether or not the claimant is ultimately approved.
  • Conditional acknowledgments are common. If you apply for life insurance, chances are you will receive a binding conditional receipt. Just to be sure ask your insurance agent.

How does conditional receipt life insurance work?

Let’s look at an example to better understand how conditional receipt life insurance, or binding conditional receipts, works.

Let’s say, for example, that Anna is a healthy 40-year-old woman. On Jan. 1, she applied for a $1 million whole life insurance policy, which eases a six to eight week waiting period due to the required medical exam.

Then, Anna is unexpectedly killed in a car accident on January 10. This happens before the insurance company has had time to approve or deny their policy.

In this case, if Anna has a binding conditional receipt, the insurance company must pursue her claim. If it is finally approved, the insurance company must pay the already agreed death benefit. If denied, the insurance company does not have to pay.

If his insurance policy does not have a conditional receipt, the insurance company may halt the application process. The insurance company is only obliged to pay the benefit if:

  • The applicant is finally approved
  • The application is submitted and the first premium is paid
  • The receipt is classified simply as “binding” and not conditional

Why is there a need for conditional receipt life insurance?

Generally, the requirement that holds back any life insurance policy is the medical examination. Many types of term life insurance, such as final expense or simplified issue policies, do not require a medical exam. These usually only take a few days (sometimes a few hours) to determine the approval or denial status.

But permanent life insurance like whole or universal life, especially the more expensive policies, usually requires a medical exam, and that’s what takes time.

More expensive term life insurance policies may also require a medical exam. You may see insurance advertisements offering no-medical life insurance up to a predetermined amount. This is usually term life insurance, but if you go over the amount set, you will need to undergo a medical examination.

Why buy conditional receipt life insurance?

The good news is that, in most cases, you don’t need to purchase conditional receipt life insurance at all. It just comes with politics. Most life insurance policies come with a conditional receipt.

Just in case, ask your insurance agent if your policy includes a binding conditional receipt. You would hate to be caught unprotected if anything were to happen to you between the time of application and approval. Don’t expose yourself.

Who benefits from conditional receipt life insurance?

The beneficiaries of the conditional life insurance are of course the same as the beneficiaries of the life insurance contract itself. It doesn’t change. What’s different is that if you don’t have a conditional receipt, your beneficiaries won’t receive the death benefit if you die between the time of application and final approval.

Remember, the number one reason you buy a life insurance policy is to protect those you love. How do you protect them if, between the time of application and the time of approval, there are up to eight weeks during which there is no protection. In this case, your protection is to know that conditional receipt life insurance exists and to make sure that you have it. Don’t be taken aback assuming you are covered at the time of application. Just paying your first premium doesn’t necessarily mean you’re already covered.

Compare life insurance

Now that you have a good idea of ​​what conditional life insurance is, it’s time to decide what type of policy you’ll need – how much coverage and who to buy it from.

Understanding conditional receipt life insurance

Understanding conditional receipt life insurance is nothing more than understanding what life insurance is. Of course, if you get a term life insurance policy where the waiting period is only a few days or even hours, there’s really no need for a conditionally binding contract. You can get one anyway, but the type of insurance you’ll need to make sure you have conditionally binding coverage for is permanent insurance like whole life or universal.

If you’re considering a life insurance policy with a large death benefit that requires a medical exam, you need to make sure you’re covered during the interim period between application and final approval. Understanding exactly what conditional life insurance is and making sure you have it can make all the difference if the unexpected suddenly happens.

Frequently Asked Questions

How is a conditional receipt different from a binding receipt?

1

How is a conditional receipt different from a binding receipt?

request

Philip Loyd, Licensed Insurance Agent

1

If you are ultimately approved for your life insurance policy, there is no real difference between a conditional receipt and a simple binding receipt. If, however, something happens to you between the time of the request and the denial, then there is a huge difference. Conditional receipts only pay the death benefit if you are ultimately approved. A simpler binding receipt ensures that the death benefit is paid whether you are approved or not.

Answer link

responded

Benzinga

What is a conditional receipt used for?

1

What is a conditional receipt used for?

request

Philip Loyd, Licensed Insurance Agent

1

The purpose of a conditional receipt is of course to ensure that you are covered from the moment you sign your application and make your first premium payment. Most people just assume they are covered at the time, but if something happens to you and you end up being denied coverage, you won’t be covered.

Answer link

responded

Benzinga