What Does Binder Mean?
A binder, in the context of insurance, is a document that provides proof of insurance before an actual insurance policy arrives. Binders typically state the terms of the insurance policy, the types of risk covered, the time limits insurance is provided for, and so on. Binders are designed to be temporary and not meant to be used for a long period of time.
Insuranceopedia Explains Binder
Binders are similar to temporary driver’s licenses. They provide short-term legal proof of validation until the formal version arrives. An authorized agent or the actual insurer typically issues them. Their main purpose is to let policyholders know they actually have coverage before the policy physically arrives. Without binders, policyholders may be concerned about when coverage starts. Binders alleviate such concerns and authenticate the same amount of coverage as the actual policy.