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A binder is a temporary insurance contract delivered by the insurer to the insured before a permanent insurance policy is issued. The purpose of a binder is to provide insurance coverage and stand in the place of the permanent policy until the permanent policy is finalized or approved or disapproved by the insurer. This way, the insured is not subject to the risk of loss during the delay of obtaining a permanent insurance policy. 

[Last updated in June of 2021 by the Wex Definitions Team]