Question 20

Only a binding receipt always provides insurance that is effective from the date the receipt is given.

A binding premium receipt guarantees that coverage is effective immediately upon issuance, regardless of the applicant's insurability, as long as the premium is paid. This contrasts with a conditional receipt, which may require further underwriting before coverage becomes effective.

A) Premiums must be paid to receive only a conditional receipt.

This statement is incorrect because both conditional and binding receipts require premium payment. However, the key difference lies in the terms of coverage; a binding receipt provides immediate coverage while a conditional receipt may not.

B) The applicant must be insurable in order to have coverage only under the binding receipt.

This option is misleading as it is the conditional receipt that requires the applicant to be insurable for coverage to be effective. A binding receipt provides coverage without the need for immediate insurability assessment.

C) Only a binding receipt always provides insurance that is effective from the date the receipt is given.

This statement accurately describes the nature of a binding receipt. It ensures that coverage starts immediately upon issuance, thus protecting the applicant from potential insurability issues that may arise after the fact.

D) Only a conditional receipt always provides insurance that is effective from the date the receipt is given.

This option is incorrect because a conditional receipt does not guarantee immediate coverage; it typically requires that certain conditions, such as insurability, be met before the insurance becomes effective.

Conclusion

The correct answer, C, highlights the definitive nature of a binding receipt, which guarantees immediate coverage upon issuance. In contrast, options A, B, and D misrepresent the characteristics of conditional and binding receipts, leading to confusion about their respective requirements and implications for insurance coverage.