Texas Life Agent Practice Exam

What is true regarding the issuance of a conditional receipt?

1. The coverage begins on the application date

2. The coverage begins immediately

3. The coverage begins after the insured passes a physical

4. The coverage begins at the later of the application date or passing the physical

The correct answer is: The coverage begins at the later of the application date or passing the physical

A conditional receipt is a document provided by an insurance company that indicates that coverage may begin as of a certain date, pending the satisfaction of specific conditions. The correct answer states that coverage begins at the later of the application date or passing the physical examination. This means that even if the applicant submits the application and receives a conditional receipt, the actual coverage will not commence until they pass any required physical examination, if that is a condition specified in the receipt. Thus, if the applicant applies and the company issues the receipt but the applicant does not pass the medical exam, the coverage does not take effect until that condition is met. In situations where the physical examination is not satisfactory, the insurer retains the right to deny coverage, even if the application was submitted on an earlier date. Therefore, the conditional receipt acts as a promise of coverage that is contingent upon meeting required conditions, such as passing a physical exam, hence coverage begins only after these criteria are fulfilled.