What is the term used to describe an insurance policy that becomes effective immediately once a binding receipt is issued?

The term used to describe an insurance policy that becomes effective immediately once a binding receipt is issued is a temporary policy. A temporary policy provides coverage during the initial period between the issuance of the binding receipt and the formal approval of the policy by the insurance company. This allows the insured to be protected even before the comprehensive underwriting process is complete.

In contrast, an agency policy typically refers to the formal agreement or contract between the insurance agent and the insurance company rather than the immediate temporary coverage provided by a binding receipt. A binding contract indicates an agreement that is legally enforceable, but it does not specifically denote the immediate insurance coverage provided upon issuance of the binding receipt. Preliminary coverage may suggest coverage that is in an introductory stage, but it is not a standard term used to describe the immediate effect of a binding receipt as a temporary policy does.