Binder
A temporary insurance agreement that provides coverage immediately while the formal policy is being issued.
An insurance binder is a temporary contract that provides proof of insurance and activates coverage before the formal policy documents are issued and delivered. It is typically issued on the day you request coverage or close on a property and is valid for 30–90 days. The binder is the document you hand to a mortgage lender at a real-estate closing to prove the property is insured.
Binders are common in property and casualty insurance (homeowners, auto) where immediate coverage is needed. They contain the key terms—policyholder name, property address, coverage limits, deductible, effective date, and insurer name—that the final policy will document in detail. The binder is binding on the insurer immediately; coverage begins at the stated effective date and time.
If the insurer later decides not to issue a permanent policy (after underwriting review), they must provide advance written notice before canceling the binder. In the interim, you are covered. Always keep a copy of the binder until the full policy documents arrive.
Real-World Example
The real estate attorney accepted an insurance binder at the closing table, confirming the home was insured as required by the mortgage lender.