Which of the following statements concerning binders is correct? - ProProfs Discuss
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Which of the following statements concerning binders is correct?



A. They guarantee that a policy will be issued.
B. They can be issued by insurance companies, but not agents.
C. They expire on the effective date of the policy to which they apply, or on the expiration date of the binder if the policy is not issued.
D. They show an intent to consider issuing insurance, but do not include any commitment to provide coverage.

This question is part of Chapter 4 - Insurance Transactions
Asked by Fsspc, Last updated: Jun 11, 2020

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John Smith

John Smith

Answered Mar 11, 2017

They expire on the effective date of the policy to which they apply, or on the expiration date of the binder if the policy is not issued.

C is correct. An agent or an insurance company can issue a binder. A binder does not guarantee that a policy will be issued; it only guarantees temporary coverage. If the company decides to not issue the policy, coverage under the binder may be cancelled by a formal cancellation notice; however, if no formal cancellation is made, coverage remains in effect until the binder expires. If a policy is issued, coverage under the binder ceases as of the effective date of the policy.
 

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