Which statement best describes a binder in insurance?

Which statement best describes a binder in insurance?

• A. A binder provides indefinite proof of coverage.
• B. A binder provides temporary proof of coverage before a formal policy is issued.
• C. A binder permanently confirms coverage.
• D. A binder is a rider added to a policy.

Answer: (B)

A binder provides temporary proof of coverage while the policy is being written and before the formal policy is issued. It guarantees coverage for a set period and ends when the actual policy is issued or the binder expires. It is not indefinite or permanent, and it isn’t a rider added to a policy.

A binder provides temporary proof of coverage while the policy is being written and before the formal policy is issued. It guarantees coverage for a set period and ends when the actual policy is issued or the binder expires. It is not indefinite or permanent, and it isn’t a rider added to a policy.