Which situation will NOT cause a binder to cease to exist?

Which situation will NOT cause a binder to cease to exist?

• A. The binder expires automatically at midnight on the issue date
• B. The 60 days following the issue date of the binder
• C. The insured cancels the policy
• D. The policy is issued

Answer: (B)

A binder is a temporary promise of insurance that takes effect immediately and remains in force until a policy is issued or until its specified duration runs out. The important idea is that a binder isn’t permanent; it ends when one of a few events occurs, such as a policy being issued, the binder’s expiration date passing, or the insured or insurer canceling. The scenario of a 60-day window after the binder is issued describes the standard period during which the binder will be active. It does not by itself cause the binder to cease to exist inside that window. In other words, the binder continues to provide coverage throughout those 60 days unless a policy is issued earlier, or another cancellation or expiration triggers its end. The other situations—automatic expiration at midnight on the issue date, cancellation by the insured, or issuance of the actual policy—all cause the binder to cease.

A binder is a temporary promise of insurance that takes effect immediately and remains in force until a policy is issued or until its specified duration runs out. The important idea is that a binder isn’t permanent; it ends when one of a few events occurs, such as a policy being issued, the binder’s expiration date passing, or the insured or insurer canceling.

The scenario of a 60-day window after the binder is issued describes the standard period during which the binder will be active. It does not by itself cause the binder to cease to exist inside that window. In other words, the binder continues to provide coverage throughout those 60 days unless a policy is issued earlier, or another cancellation or expiration triggers its end. The other situations—automatic expiration at midnight on the issue date, cancellation by the insured, or issuance of the actual policy—all cause the binder to cease.