Life License Qualification Program (LLQP) Practice Exam

What type of receipt is given to an applicant if the insurer is bound to coverage as of the application date?

1. Binding receipt

2. Conditional receipt

3. Warranty receipt

4. Backdated receipt

The correct answer is: Conditional receipt

The answer is a binding receipt, as it signifies that the insurer is obligated to provide coverage from the moment the applicant submits their application, assuming the premium is paid at that time. A binding receipt is a type of acknowledgment that ensures immediate coverage, meaning that even if the application has not been fully processed or approved, the insurer accepts the risk from the date the receipt is issued. This contrasts with other types of receipts. A conditional receipt, for example, typically indicates that coverage will begin only if specific conditions are met, such as the approval of the application or the payment of the first premium. Warranty receipts, while less common, involve guarantees about certain facts or conditions being true, rather than covering immediate insurance obligations. Backdated receipts may refer to policies that apply to past events, which is not the scenario described where coverage is effective immediately upon the application. Understanding these distinctions can clarify the nature of the receipts and their significance in the context of insurance coverage.