What is a document called that offers temporary insurance coverage until a permanent policy is issued?

A binder is a document that provides temporary insurance coverage until the formal insurance policy is issued. It acts as a short-term agreement that ensures the insured is protected during the interim period while the insurer processes the full policy. Binders are used to create an immediate start to coverage, which is especially important when there is a pressing need for insurance, such as when purchasing a home or vehicle.

The purpose of the binder is to confirm that coverage is in place, outlining basic terms and conditions while the insured waits for the finalized policy documents. It typically includes essential details such as the type of coverage, limits, and effective dates.

This concept is critical in personal lines insurance, as it helps maintain continuous coverage for the insured person during the transition from application to the issuance of the complete insurance policy. Understanding the function of a binder is important for anyone working in insurance or seeking coverage, as it provides a safety net against potential liabilities that could arise before a policy is fully finalized.