What is the definition of Binder?

A Binder is a temporary and immediate authorization of coverage. It can come in written or oral form and is given before the actual insurance policy is issued. The binder serves to bind both parties (the prospective policy owner and the insurance company) to the insurance contract. It provides temporary insurance coverage to the prospective policy owner until such time that the insurance company accepts or denies his application.

For example, while waiting for a person's information that is pertinent to the insurance policy (health documents, credit history and past insurance history), a binder is provided by Johnny's insurance agent. The binder effectively protects Johnny as a regular insurance policy would. However, the coverage will lose its effectiveness after 10 days.

The binder requires the following information:

• the name of the prospective insured
• the name of the insurance company
• the kind of insurance coverage
• the limits with respect to the face amount or the kind of insurance
• the perils or hazards being covered

• Reinstatement
• Registered Principal
• Liquor Liability
• Businessowners Policy (BOP)
• Directors and Officers Liability Insurance