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12 INTERIM INSURANCE: COVER NOTES AND BINDERS

Law of Insurance Contracts

Chapter 12 INTERIM INSURANCE: COVER NOTES AND BINDERS 12-1 INTRODUCTION The purpose of interim insurance, called a binder in the United States 1 and often recorded in a cover note in England, is to give the insurer time to assess the risk and to decide whether to offer cover (here called “the policy”) over a longer period, while offering interim cover to the proposer—especially when the proposer’s need for cover is pressing. If, having considered the proposal fully, the insurer does not want the risk, the insurer is not obliged to make the longer commitment required by the policy. Interim insurance is beneficial to the insured, who has immediate cover 2 in order, for example, to use the car he or she has just bought. It is beneficial to the insurer, for the facility of interim cover increases the chance of business at minimum cost in investigating risks, without sacrificing altogether the option of refusing an undesirable policy proposal. It is most common in respect of fire and motor risks, however, it has also been found on lives in the United States. 3

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