When you select a life insurance policy, you will fill out an application for coverage. In most cases, when you leave your insurance agent's office, he or she will give you a document notifying you that you currently have "conditional coverage" life insurance.
After you fill out an insurance application, your agent sends the policy to the insurance company's underwriting department. The underwriters review the information on your application and eventually make a decision whether to provide you life insurance.
Conditional coverage life insurance is coverage that begins as soon as you sign an insurance application. Basically, it means that you are covered by your insurance policy immediately -- provided that the insurance company's underwriters approve your application.
If you die before the insurance company reaches its decision about your application, the underwriter continues the underwriting process. If the underwriter decides that the policy would have been approved, your beneficiary will receive the amount of money stipulated in your policy. But if the application would not have been approved, your beneficiary may receive nothing or a reduced amount.
The laws governing how long an insurance company has to decide whether to provide you insurance vary from state to state, meaning that the maximum amount of time you are subject to conditional coverage varies based on where you live. The average is around thirty days.
Some insurance companies offer temporary coverage during the underwriting process to people who are generally in good health. Temporary coverage guarantees that your beneficiaries will be paid during the time specified by the insurance contract, regardless of the ultimate outcome of your application.