Alabama Property and Casualty Practice Exam

A binder can expire on all of the following EXCEPT?

1. Date of application

2. Day coverage goes into effect

3. Day the binder goes into effect

4. Day following notification that the binder has been canceled

The correct answer is: Date of application

A binder is a temporary agreement issued by an insurance company to provide coverage until the formal policy is issued. While a binder can indeed expire under various circumstances, it does not typically expire on the date of application. This is because the application date is simply when the request for coverage is made; it does not necessarily correlate with the binding terms or the instantiation of coverage. A binder remains in effect until it is fulfilled by the issuance of an insurance policy or until it is canceled by either party. The other options refer to specific points in time when the binder can cease to be effective. Coverage may start on the day the binder is issued, but the binder itself is tied to the application and potential issuing of a policy rather than expiring based solely on the date the application was submitted. In conclusion, the date of application does not signify a point of expiration for a binder, making it distinct from other scenarios in which a binder is more likely to be nullified.