What is an "insurance binder"?

An insurance binder is a temporary agreement that provides proof of insurance coverage until the formal insurance policy is issued. This document is crucial because it gives the insured immediate coverage and is often used when the insured needs to show they have insurance in place, such as when closing on a home or starting a new policy.

The binder ensures that coverage is in effect before the official policy paperwork is finalized, allowing both the insured and insurer to proceed without the risk of a coverage gap. Once the policy is issued, the terms outlined in the binder will typically be reflected in the formal insurance documents. Thus, option B accurately captures the essence of what an insurance binder is and its function in the insurance process.