When can an insurer issue a binder?

A binder is a temporary agreement that provides immediate coverage and is generally used while the details of the insurance policy are being finalized. The purpose of a binder is to ensure that the insured has coverage in place even before the formal policy is issued. This is particularly important in situations where coverage is needed right away, such as when purchasing a new home or vehicle.

Issuing a binder before the policy issuance allows the insurer to offer a level of protection to the policyholder during the transition period. It indicates that the insurer intends to issue a policy under certain conditions, but it does not require the completion of the full underwriting process or payment of the premium beforehand. Consequently, the statement that a binder can be issued before policy issuance to provide coverage captures the essence of its function in the insurance process.