Which statement about binders is true?

Which statement about binders is true?

• A. Binders provide temporary coverage before the policy is issued.
• B. Binders require a full policy to be in force first.
• C. Binders never specify the insurer.
• D. Binders are only oral and not written.

Answer: (A)

Binder provides temporary coverage before the policy is issued. It acts as a short-term agreement that puts insurance in force while the formal policy is being prepared, taking effect immediately and continuing until the policy is issued or the binder expires. The binder will specify the insurer, the insured, the coverage limits, the premium, and the expiration date, so coverage exists even though the full policy hasn’t been issued yet. This is why you don’t need a full policy in force first—the binder creates coverage for a defined period. Binderson can be written or, depending on state law, can be oral, but the key point is that binders establish temporary coverage and identify the insurer; the other statements—requiring a full policy first, never naming the insurer, or being exclusively oral—don't fit the typical concept of a binder.

Binder provides temporary coverage before the policy is issued. It acts as a short-term agreement that puts insurance in force while the formal policy is being prepared, taking effect immediately and continuing until the policy is issued or the binder expires. The binder will specify the insurer, the insured, the coverage limits, the premium, and the expiration date, so coverage exists even though the full policy hasn’t been issued yet. This is why you don’t need a full policy in force first—the binder creates coverage for a defined period. Binderson can be written or, depending on state law, can be oral, but the key point is that binders establish temporary coverage and identify the insurer; the other statements—requiring a full policy first, never naming the insurer, or being exclusively oral—don't fit the typical concept of a binder.