A binder in the insurance industry is a temporary agreement of the insurance company to provide coverage while it seeks to issue a policy based upon the representations made in the application for insurance. The binder may be issued by an insurance agent or an insurance company.
A binder should contain the name of the insured and a time limit for the insurance being provided (usually a short period of ten, fifteen or thirty days). The binder normally will be in writing and the type of insurance being provided will be described.
A binder is a legal contract. The person or business applying for the insurance is considered an applicant during the effective period of the binder. Once the policy is issued, the applicant becomes a policyholder. As with any contract, a binder may be oral or in writing. However, proof of the contract and of the insurance is facilitated if the binder is in writing and describes the elements of who is insured for what occurrence or claim and for what period of time.
The usual function of a binder is to provide proof of insurance following receipt of an application for insurance but pending examination of the application and the warranties and representations of the applicant being made to the insurance company. Issuance of the actual policy of insurance may take some time depending upon the complexity of the risk of being insured. Including references in the binder to past policies or to particular policy forms may be helpful in the determination of contractual terms if a loss should occur during the term of the binder but prior to the issuance of the policy.
Copyright 2010 LexisNexis, a division of Reed Elsevier Inc.
Ski and Recreation Law
