Individuals or businesses sometimes require insurance before aninsurer can fully evaluate an application and prepare, execute anddeliver the policy. To meet this need, many insurers authorizetheir agents to issue binders, which are documents that evidencethe existence of insurance during the application process andbefore a policy is issued and delivered. Binders can be valuabletools, 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 ofa formal policy of insurance. It provides the same coverage to becontained in the soon-to-be written policy. Usually the binder iseffective until it expires by its own terms, even if the insurerdoes not issue a policy to the insured.
Agent vs. Broker Distinction
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