In insurance terms, what is a 'binder'?

A binder in insurance is essentially a temporary insurance agreement that provides immediate coverage until the formal insurance policy is issued. This document serves as proof of insurance, outlining the terms, conditions, and coverage limits agreed upon between the insurer and the insured. It allows clients to have immediate protection during the interim period before the official policy documents are finalized. This can be particularly crucial in situations such as real estate transactions, where proof of insurance is often needed to complete the process.

The other options refer to distinct concepts within the insurance realm. A permanent insurance policy implies a type of coverage that remains in effect as long as premiums are paid, which is quite different from a binder. A written endorsement modifies the terms of an existing policy but does not serve as a temporary agreement. A cancellation notice is a document indicating that an insurance policy is being terminated, which is not related to the initial coverage provided by a binder.