Binding Receipt

What Does Binding Receipt Mean?

A binding receipt is a document provided by the insurance company to the insured as proof of coverage, effective only upon payment of the initial premium. However, if the insured dies before the policy is fully paid, the company remains liable to provide some, if not all, of the benefits.

Insuranceopedia Explains Binding Receipt

A receipt typically serves as an acknowledgment of payment, but a binding receipt is distinct in that it acknowledges the insurer’s commitment to provide coverage. This commitment is contingent upon the insured making their first payment. Once the initial payment is made, the insurer is bound to provide coverage, even if the official insurance contract is still being processed. If the insured dies before fully paying the premium, the insurer is still obligated to provide coverage, though it may be limited in scope.