Which of the following statements about binders is correct?

The correct statement regarding binders is that oral binders must be documented in writing. A binder serves as a temporary insurance contract that provides proof of coverage until a formal policy is issued. While oral binders are recognized in many situations, having a written documentation serves to clarify the terms, conditions, and duration of the binder, ensuring that both parties have a clear understanding of the coverage provided. This written documentation helps to prevent misunderstandings that can arise from verbal agreements.

It is essential to have a written record of the binder, especially since it represents a commitment from the insurer to provide coverage. This is crucial for legal purposes and helps both the insurer and the insured maintain clarity regarding their obligations and rights during the interim period before the full policy is finalized.