What is the purpose of a conditional receipt?

The purpose of a conditional receipt is primarily to assure applicants of coverage while they await the completion of the underwriting process. When an applicant pays a premium at the time of applying for insurance, the conditional receipt serves as a temporary acknowledgment that they are under consideration for the policy. This means that if the insurer later approves the application, the coverage will be considered effective retroactively to the date of the conditional receipt, provided that all conditions outlined in the receipt are met.

This mechanism allows applicants to have a degree of reassurance that they are likely covered during the potentially lengthy underwriting process, even though the final decision on their insurance application has not yet been made. It is an important distinction that coverage is not yet guaranteed, as the insurer still retains the right to reject the application based on underwriting evaluations.