AD Banker Comprehensive Practice Exam

If a premium is collected at the time of the application, the producer will issue which type of receipt?

1. Contestable receipt

2. Sales receipt

3. Conditional receipt

4. Guaranteed receipt

The correct answer is: Conditional receipt

When a premium is collected at the time of the application, the appropriate receipt issued by the producer is a conditional receipt. This type of receipt is significant because it provides temporary coverage to the applicant while the insurance company processes the application and underwriting. A conditional receipt indicates that coverage will be effective upon the insurance company's approval of the application, assuming all relevant conditions are met, including the acceptance of the premium. This allows the applicant to feel secure that they have some level of protection during the awaiting period before the policy is officially issued. The other options refer to different situations or types of receipts. A contestable receipt does not exist formally in standard insurance terminology, and a sales receipt generally does not imply coverage. A guaranteed receipt typically means that the applicant receives coverage immediately, which is different from the concept of conditional coverage contingent upon underwriting. Thus, the conditional receipt properly reflects the nature of the transaction when the premium is collected at the time of application.