In a conditional receipt, what determines whether coverage goes into effect?

In a conditional receipt, coverage goes into effect based on the fulfillment of certain specified conditions. This type of receipt is issued by an insurer to an applicant when a life insurance application is submitted, often accompanied by the initial premium payment.

The critical aspect of a conditional receipt is that it outlines specific conditions that must be met for the insurance coverage to become effective. Typically, these conditions include the applicant's eligibility based on their health status as assessed by the insurer at the time of application. If these conditions are satisfied—such as the applicant being in good health or meeting any other criteria set forth in the receipt—then the coverage will be considered active as of the date of the receipt.

This mechanism allows applicants to obtain immediate, though conditional, coverage pending the insurer's final underwriting decision. Understanding this concept is vital, as it emphasizes that the receipt does not guarantee coverage; rather, it indicates that coverage will commence upon meeting the clearly defined stipulations outlined within the receipt.