Georgia Property & Casualty Practice Exam

When does a binder for a professional liability policy expire after the first premium payment?

1. The binder is perpetual.

2. Aug. 1, or 90 days later.

3. June 1.

4. May 31, or 30 days later.

The correct answer is: June 1.

A professional liability policy binder is a temporary agreement that provides coverage before the actual policy is issued. The duration of this binder is typically defined by guidelines established within the insurance contract and applicable state regulations. In this scenario, the most accurate understanding is that a binder usually expires after a specified period unless otherwise defined. When the first premium payment is made, the binder typically remains effective for a limited time, often up to 90 days, giving the insured time to finalize the policy terms. Considering the provided answer, June 1 does not align with the standard timelines set for binders in professional liability insurance. Typically, binding coverage lasts until the formal policy is issued or for about 30 to 90 days following the first premium payment. Therefore, a June 1 expiration does not accurately reflect a general understanding of how professional liability policy binders function. In the context of binders for professional liability policies, the correct answer would involve a duration that covers a typical period such as 30 days or 90 days post-payment, which options are not aligning with the June 1 date given as the selected answer. This illustrates an understanding of the duration of temporary coverage granted by a binder and its standardized expiration conditions in the insurance industry.