What defines a binding agreement in insurance?

A binding agreement in insurance is best defined as a commitment by the insurer to provide coverage once the application is accepted. This means that once the insurer reviews and accepts the application, an enforceable agreement is created, obligating the insurer to provide coverage according to the terms outlined.

When the application is accepted, the insurer typically assesses the risk based on the information provided and agrees to take on that risk by issuing a policy or a binder. This acceptance is crucial because it indicates that both parties have agreed to the terms, and the insurer acknowledges its obligation to cover the applicant in accordance with the policy terms once it goes into effect.

The other choices describe concepts that don’t fully capture the essence of a binding agreement. A verbal promise does not hold the same legal weight as a written agreement. A commitment after policy issuance implies that coverage exists only after the policy is formally issued, which does not take into account the possibility of coverage beginning immediately upon acceptance. Temporary coverage until payment is made suggests a contingent arrangement that does not reflect the definitive obligation established by an accepted application.