What is an "insurance binder"?

An insurance binder serves as a temporary agreement that provides coverage for the insured before the formal insurance policy is issued. This means that once the binder is issued, the insurer agrees to provide the same coverage that will be outlined in the formal policy, granting immediate protection. It is often utilized to ensure that the insured has coverage while the policy is being prepared, thus filling the gap between the application and the issuance of the formal policy.

The other options describe different aspects of insurance documentation but do not reflect the role of a binder. For instance, detailing liability limits pertains to the specific terms of coverage in an existing policy, whereas a summary of claims made under a policy tracks incidents rather than serving as an agreement for coverage. Lastly, a final notice before policy cancellation addresses the policy termination process rather than the initiation of coverage. Therefore, the definition of an insurance binder as a temporary coverage agreement is accurate and reflects its essential function in the insurance process.