PSI Ohio Insurance Practice Exam

Which type of receipt holds the insurer responsible for the risk from the date of application regardless of the applicant's insurability?

1. Conditional receipt

2. Temporary receipt

3. Binding receipt

4. Statutory receipt

The correct answer is: Binding receipt

A binding receipt is a type of receipt that guarantees coverage to the insured immediately upon the application being submitted, regardless of the underwriting process or the assessment of the applicant's insurability. This means that as long as the applicant pays the required premium, the insurance company is obligated to provide coverage from the date of the binding receipt issuance, even if the insurer later determines that the applicant does not meet its underwriting standards. This characteristic distinguishes a binding receipt from other types of receipts, such as conditional, temporary, or statutory receipts, which may have specific stipulations or conditions that must be met before coverage becomes effective. For instance, a conditional receipt typically provides coverage only if the applicant is found to be insurable under the insurer's standards, while a temporary receipt may offer limited or provisional coverage. In summary, the binding receipt establishes immediate responsibility for the risk on the part of the insurer, making it a crucial document in the application process for those seeking insurance coverage.