a written memorandum of the important terms of a preliminary contract that gives temporary protection to the contract while further investigation is performed. Often used for insurance purposes (when buying a car it is appropriate to call the agent and put an insurance binder on it, so the owner is insured before the policy is prepared) and for home purchases until a more formal document is prepared.
sum of money paid to evidence good faith until a transaction is finalized. In insurance, the binder is an agreement executed by an insurer (or sometimes an agent) that puts insurance coverage into force before the contract is signed and the premium paid. In real estate, the binder holds the sale until the closing and is refundable.
temporary insurance contract providing coverage until a permanent policy is issued. In property and casualty insurance, some agents have authority to bind the insurance company to cover until a policy can be issued. For example, the purchaser of an automobile can call the agent, who can then bind the insurance company to temporary coverage.
an agreement, accompanied by a deposit, for the purchase of real estate, to evidence good faith on the part of the purchaser.
Example: Abel gave Baker a binder on the house; Abel then contacted his attorney to prepare the papers for a contract.
