Individuals or businesses sometimes require insurance before an insurer can fully evaluate an application and prepare, execute and deliver the policy. To meet this need, many insurers authorize their agents to issue binders, which are documents that evidence the existence of insurance during the application process and before a policy is issued and delivered. Binders can be valuable tools, but they also present areas of E&O exposure for agents, brokers and producers.
A binder is a contract made in contemplation of the issuance of a formal policy of insurance. It provides the same coverage to be contained in the soon-to-be written policy. Usually the binder is effective until it expires by its own terms, even if the insurer does not issue a policy to the insured.
Agent vs. Broker Distinction
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