Which term describes a temporary agreement providing immediate coverage?

Which term describes a temporary agreement providing immediate coverage?

• A. Conditional receipt
• B. Binding receipt
• C. Policy endorsement
• D. Guaranteed acceptance

Answer: (B)

The term that describes a temporary agreement providing immediate coverage is a binding receipt. When an applicant pays the premium and receives a binding receipt from the insurance company, that receipt acts as a temporary contract, putting coverage into effect immediately, even before a formal policy is issued. This means that if a loss occurs during this period, the insurer is obligated to pay the claim as if the policy were in force. In contrast, a conditional receipt may provide temporary coverage, but only under certain conditions that must be met, such as the applicant being found insurable based on the underwriting process. A policy endorsement refers to a modification or addition to an existing insurance policy, rather than a temporary coverage agreement. Guaranteed acceptance typically relates to certain types of life insurance policies that do not require medical underwriting but does not imply temporary coverage. Therefore, a binding receipt is the appropriate term for an immediate coverage agreement.

The term that describes a temporary agreement providing immediate coverage is a binding receipt. When an applicant pays the premium and receives a binding receipt from the insurance company, that receipt acts as a temporary contract, putting coverage into effect immediately, even before a formal policy is issued. This means that if a loss occurs during this period, the insurer is obligated to pay the claim as if the policy were in force.

In contrast, a conditional receipt may provide temporary coverage, but only under certain conditions that must be met, such as the applicant being found insurable based on the underwriting process. A policy endorsement refers to a modification or addition to an existing insurance policy, rather than a temporary coverage agreement. Guaranteed acceptance typically relates to certain types of life insurance policies that do not require medical underwriting but does not imply temporary coverage. Therefore, a binding receipt is the appropriate term for an immediate coverage agreement.