What is a binding receipt?

A binding receipt serves as a promise from the insurance company that coverage is in force from the moment the receipt is issued, as long as the applicant pays the initial premium and meets certain requirements outlined in the receipt. This means that even if the applicant has not yet gone through the full underwriting process or if the insurance company later determines that the applicant is uninsurable, the binding receipt guarantees that coverage will apply during that specified period until a decision is made on the full policy.

This guarantees that the insured has immediate coverage, which is essential for providing security during the underwriting process. The coverage provided under a binding receipt is contingent upon the applicant being insurable based on the company's standards, typically assessed after the initial application. However, the key point is that the binding receipt guarantees coverage during this phase, unlike other temporary arrangements that may impose restrictions or limitations on benefits.