What is the purpose of an insurance binder?

An insurance binder serves as a temporary document that provides proof of insurance coverage until a formal insurance policy is issued. It is crucial because it allows insured parties to have immediate coverage in situations where they need it urgently, such as when closing on a property or engaging in activities that require proof of insurance.

While a claims history report provides details on past claims, and a final version of the policy outlines the specific terms and coverage after it has been reviewed and accepted, these do not fulfill the immediate need for coverage that a binder provides. Similarly, an estimate of premium deductions does not relate to the validation of coverage itself. Thus, the purpose of an insurance binder distinctly lies in its function as an interim assurance of insurance until the official policy is issued.