State Farm Auto Insurance Practice Test

What type of insurance application involves coverage before underwriting approval?

1. Non-Bound

2. Bound

3. Conditional

4. Temporary

The correct answer is: Bound

The type of insurance application that involves coverage before underwriting approval is referred to as "Bound." When an application is bound, it means that the insurance company has agreed to provide coverage starting from the moment the application is accepted or the premium is paid, even if the underwriting process is not yet completed. This allows for immediate coverage for the policyholder, ensuring they are protected from risk during the underwriting period. In context, non-bound applications do not provide coverage until the insurance company has fully approved the policy based on underwriting criteria. Conditional applications indicate that coverage may be provided contingent upon certain conditions being met during underwriting. Temporary applications often reflect a short-term measure for immediate protection but generally do not signify a bound agreement in the same way permanent coverage does.