What Is An Insurance Binder?
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An insurance binder provides temporary proof of insurance coverage until a formal insurance policy is finalized. Binders should satisfy any insurance requirements you must meet before the official policy is finalized, such as having proof of coverage when closing on a mortgage, auto or commercial property loan. However, many home and auto insurance applications have turnarounds as quick as one day, eliminating the need for an insurance binder.
Insurance binders typically expire after 30 to 90 days. It’s essential that you follow up with your insurer on your main policy’s status to avoid any coverage gaps.
When Do You Need A Binder?
Binders are generally used when you finance your car, home or commercial property and you need immediate coverage while your official policy is being finalized. For example, you can get a home insurance binder to meet the insurance requirements for closing on a mortgage loan. After your main policy is finalized, its coverage takes over and the binder expires. Similarly, you can get an insurance binder if your lender requires proof of coverage before closing on your new car’s auto loan.
Application turnarounds can sometimes stretch out depending on your background and risk profile. In these cases, an insurance binder would be useful. For example, an insurance binder may be necessary if your car insurance application is undergoing extended consideration because your driving history carries multiple DUIs. In this case, your carrier may issue an insurance binder so you can meet the insurance requirements for closing on an auto loan.
This is why insurance binders typically last 30 to 90 days — you need the temporary coverage until you can finalize a more long-term policy.
However, a binder is unnecessary if you can get same-day coverage or if you schedule your policy’s start date ahead of time. For example, your provider may set the start date of your insurance policy to occur on the closing date when purchasing a home. Similarly, you can purchase a new and schedule your auto policy’s effective start date for the day you drive your new car off the dealership lot.
What Is Found in an Insurance Binder?
Insurance binders will lay out who and what is being insured. Review your binder and be sure the following information is included:
- The basics: The binder should identify the insurance company, type of coverage (home, commercial or auto) and the legal name of the agent authorizing the policy.
- Insured individuals or property: The insured person or property should be clearly stated. For example, a car insurance binder should specify the make, model and vehicle identification number (VIN) and a homeowners or commercial property insurance binder should list the address of the insured property. The binder should also list any mortgage or lienholders.
- Duration: Clearly understand when your binder coverage begins and ends.
- Coverage amount: The insurance binder must contain specific information regarding the coverage limit, deductible amount, fees and terms and conditions for each section of insurance.
- Premium amount: The insurance binder should state the premium amount and its due date, plus other applicable fees.
If the underwriting process will take more time than expected, you can request that your insurance company issue you an insurance binder that will meet your coverage requirements. You can get a hard copy of your binder by mail, email or by logging into your online account.
What Types of Insurance Binders Are There?
The most common insurance binders are split into three categories: car, home and commercial — though some insurers may combine home and commercial under a single type called "property." Below is a breakdown of each binder type plus examples.
Buying a new car or applying for an auto loan
Liability, personal injury protection and collision and comprehensive coverage
Commercial property insurance
Buying commercial property (e.g., office building, storage space, retail store)
Building, equipment and contents coverage
Buying a house and taking out a mortgage
Liability, dwelling, medical payments and content coverage
Do All Insurers Issue Binders?
Not all insurance companies issue binders to their customers, especially if the application turnaround is quick enough. For example, an insurer may omit the binder offer if a consumer applies for car insurance and the carrier approves coverage that same day. Binders are generally needed for longer turnaround times, such as 30 to 90 days.
Can an Insurance Binder Expire?
A binder for insurance will expire usually after 30 to 90 days. If your binder is approaching its date, follow up with your insurance company on the status of your formal insurance policy. Otherwise, you may be without coverage once when binder expires.
What Should I Do if My Insurance Binder Expires?
If your binder is about to expire, contact your insurance company for a copy of your official policy. Do a quick review of your policy’s declaration page, which will show the kind of coverage you have, your coverage limits and your policy costs. Declaration pages are found in auto insurance, homeowners insurance and commercial property insurance policies.
How To Get an Insurance Binder
You can get an insurance binder by requesting one from your insurance provider. Binders are usually delivered electronically via email but you can request a hard copy be mailed to your address. If your insurance company has an online portal, you may also have the option to download a copy and print it yourself.
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