Which term describes the authority to bind coverage within specified limits created by the contract?

Which term describes the authority to bind coverage within specified limits created by the contract?

• A. Express authority
• B. Binding authority
• C. Apparent authority
• D. Implied authority

Answer: (B)

Binding authority is the contractual power given to a producer or broker to bind insurance coverage on behalf of the insurer, within specified limits created by the contract. This means the insurer authorizes you to commit to a policy up to certain limits and under agreed terms, often via a binder or written agreement. This differs from express authority, which is explicit permission to take specified actions; apparent authority, which comes from the third party’s reasonable belief based on the agent’s conduct; and implied authority, which is inferred from the agent’s role and customary practices. The question’s wording directly matches binding authority—the authority to bind coverage within contract-defined limits.

Binding authority is the contractual power given to a producer or broker to bind insurance coverage on behalf of the insurer, within specified limits created by the contract. This means the insurer authorizes you to commit to a policy up to certain limits and under agreed terms, often via a binder or written agreement.

This differs from express authority, which is explicit permission to take specified actions; apparent authority, which comes from the third party’s reasonable belief based on the agent’s conduct; and implied authority, which is inferred from the agent’s role and customary practices. The question’s wording directly matches binding authority—the authority to bind coverage within contract-defined limits.