Understanding Disability Insurance Policy and Conditional Receipt

When someone applies for a disability insurance policy and pays the initial premium, they receive a conditional receipt. This receipt establishes coverage, subject to certain conditions such as the passing of a medical examination. In the case of Edward, he suffered a stroke before the insurance company issued the policy. After conducting a medical examination, it was discovered that Edward had high blood pressure and atherosclerosis.

Conditional Receipt Terms

Conditional receipt: A conditional receipt is a temporary contract provided by an insurer when a policyholder pays the initial premium with their application. This receipt guarantees coverage under certain conditions until the policy is issued or declined.

Impact of Medical Conditions on Policy Issuance

Based on the terms of the conditional receipt, the insurance company would deny Edward's claim. This is because the insurer would not have issued the policy as applied for at standard or better rates due to Edward's medical conditions. The insurer has the option to deny the claim and the application, issue a rated policy (with higher premiums), or issue a standard policy that excludes coverage related to Edward's high blood pressure and atherosclerosis.

In Edward's case, the insurance company will likely deny the claim and possibly offer a modified policy based on his medical conditions. It's important for individuals applying for disability insurance to disclose all relevant medical information to avoid any issues with claims processing.