When does an insurance policy become effective after an agent gives a conditional receipt?

The correct answer highlights that an insurance policy becomes effective when the specific conditions outlined in the conditional receipt are met. A conditional receipt is a document provided to the applicant after they apply for insurance and pay the initial premium, indicating that coverage will commence if certain conditions are fulfilled, which often include medical underwriting requirements or other risk assessments.

The significance of this mechanism lies in its purpose: the conditional receipt provides provisional coverage pending full underwriting approval. Therefore, only after the insurer confirms that all conditions are satisfactorily met—such as the applicant’s information being verified and any required medical exams having been completed—does the policy become fully effective.

This method allows insurers to manage risk effectively while also providing applicants with peace of mind that they have temporary coverage during the underwriting process. The effectiveness is not automatically tied to the mere act of signing the receipt or the payment of the initial premium; it strictly depends on fulfilling the outlined conditions.