A more thorough explanation:

A binder is a temporary insurance contract that an insurer provides to the insured before issuing a permanent insurance policy. The purpose of a binder is to provide insurance coverage until the permanent policy is approved or disapproved by the insurer. This way, the insured is not at risk of loss during the delay of obtaining a permanent insurance policy.

For example, if you buy a new car, you may need to get insurance coverage before you can drive it off the lot. In this case, the insurance company may issue a binder that provides temporary coverage until the permanent policy is issued.

Another example is if you are buying a new home and need to obtain homeowners insurance. The insurance company may issue a binder that provides temporary coverage until the permanent policy is issued.

These examples illustrate how a binder provides temporary insurance coverage until a permanent policy is issued. This way, the insured is protected from any potential losses during the delay of obtaining a permanent insurance policy.