California Property & Casualty Broker-AgentCalifornia LawEasy
A California insurance producer is preparing to issue a binder for a new commercial property policy. According to the California Insurance Code, what is the maximum term for which a binder can be effective without the insurer issuing the policy or rejecting the risk?
- A120 days
- B60 days
- C90 days
- D30 days
Show answer & explanationAnswer & explanation
Correct answer: C. 90 days
California Insurance Code Section 382.5 specifies that a binder is valid for a maximum of 90 days, or until the policy is issued or the risk is declined, whichever occurs first.
Why the other options are wrong
- A. 120 days exceeds the maximum term allowed for a binder in California.
- B. 60 days is less than the maximum allowed by the California Insurance Code.
- D. 30 days is too short; the code allows for a longer period.
Binder Term Limit
In California, an insurance binder can be effective for a maximum of 90 days, or until the policy is issued or the risk is declined, whichever comes first.
- Provides temporary coverage
- Maximum 90-day term
- Can be issued by producers
Memory trick: Binders are like a temporary '90-day lease' for coverage.