Question
In: Finance
Jim purchased a new car and immediately stopped at his insurance agent's office to buy auto insurance.
Jim purchased a new car and immediately stopped at his insurance agent's office to buy auto insurance. Jim filled out the application, which the agent was going to send into the home office for underwriting the next day, and then Jim left the office with a binder from the insurance agent. Jim was in an auto accident on his way home from the insurance agent's office. Which of the following statements is true?
Jim's accident will be covered by the insurance company because the application was an offer to buy and the binder represents acceptance of the offer by the insurance company.
Jim's accident cannot be covered because Jim does not have a signed insurance policy representing the required offer and acceptance.
Jim's accident will only be covered if he paid the insurance agent the policy premium along with his completed application. Otherwise, the application itself is not a valid offer.
Jim's accident will only be covered by the insurance company if the company approves his application after completing its underwriting activities, thus accepting Jim's offer to buy insurance.
Solutions
Expert Solution
Jim's accident will be covered by the insurance company because the application was offer to buy and the binder represents acceptance of offer by the insurance company.
Meaning of Insurance Binder
- It is temporary document issued by the insurance company.
- It is a confirmation in writing that a policy will be issued.
- It will be issued for a limited period of time and it has expiry date also.
- The insurance binder is a proof of insurance you can use until you receive your actual policy.
- It is a agreement between a person and insurance company.
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