Kentucky Health Insurance Practice Exam

What is the purpose of a conditional receipt?

1. It serves as proof that the applicant has been determined insurable.

2. It is given only to applicants who fully prepay the premium.

3. It is intended to provide coverage on a date prior to the policy issue.

4. It guarantees that a policy will be issued in the amount applied for.

The correct answer is: It is intended to provide coverage on a date prior to the policy issue.

A conditional receipt is a document issued by an insurance company to the applicant upon receiving their application and premium payment. Its primary purpose is to provide coverage as of a date prior to the policy's official issuance, contingent upon certain conditions being met, such as the applicant being deemed insurable based on the underwriting process. When an applicant receives a conditional receipt, it indicates that coverage may begin before the policy is formally issued, provided that the insurance company accepts the application and the applicant meets the necessary underwriting criteria. This aspect of conditional receipts is crucial as it assures the applicant that there is a potential coverage period even while they wait for final approval of the insurance policy. In contrast, other options do not accurately reflect the primary function of a conditional receipt. While it is true that a conditional receipt does not guarantee that a policy will be issued or that it will meet the amount applied for, the correct focus lies in providing temporary coverage from the date of application provided the terms outlined in the receipt are satisfied.