What is the primary purpose of a binder in insurance?

The primary purpose of a binder in insurance is to serve as evidence of temporary insurance coverage. A binder is a document provided by an insurance company or agent that gives an insured individual or entity immediate insurance protection until the formal policy is issued. This is particularly useful when there is an urgent need for coverage, and it ensures that a policyholder has some measure of protection while waiting for the final documentation to be completed.

Binds act as temporary agreements that outline the essential terms of the coverage being provided. They typically confirm the details such as the coverage amounts, the insured parties, and the duration of the temporary coverage, making it a crucial tool for both insurers and insureds during the interim period before the formal policy is securely in place.