Which of the following best describes a conditional receipt in life insurance?

A conditional receipt is a document issued by an insurance company that provides temporary coverage to an applicant under specific conditions, typically contingent upon the approval of the policy based on underwriting requirements.

Selecting this option as the best descriptor highlights that the coverage provided by a conditional receipt is not immediate or guaranteed; rather, it starts only when the conditions outlined in the receipt have been satisfied. Typically, these conditions can include passing the underwriting process or ensuring that the initial premium payment is received. This allows the insurer to manage risk while still providing the applicant a level of assurance that coverage may be available if the conditions are met.

In contrast, the other options do not accurately reflect the nature of a conditional receipt. For example, stating that it guarantees coverage for life misrepresents the temporary nature of such a receipt, as it does not ensure permanent coverage until a policy has been formally issued. Claiming that coverage begins immediately regardless of underwriting overlooks the crucial requirement that underwriting conditions must be fulfilled first. Additionally, suggesting that coverage only starts after policy delivery fails to capture the temporary protections that may exist prior to formal policy issuance, which is what a conditional receipt aims to address.