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What Is an Insurance Binder

An insurance binder offers temporary proof of insurance. Find out more about insurance binders in this article.

Contract with magnifying glass

An insurance binder is a temporary document that serves as proof of your policy until the provider finalizes the insurance contract that outlines the set terms of your plan. Your insurance agent creates the insurance binder as a written agreement of the discussed insurance plan. You can get an insurance binder form for your homeowners and auto insurance. It keeps you insured until your agent underwrites your policy and hands over an official insurance policy contract.

Your insurance binder includes deductible amounts, coverage limits, terms of insurance and more. It should match your agreed-upon terms with the insurance company. This article covers everything you need to know about insurance binders, including:

What does an insurance binder include?

Your insurance binder includes all of the essential information about your insurance policy. You can expect to see a description of your policy as discussed with your insurance company. It may not include some specific policy wording that will be in your actual contract, but a summary of the key points. This is what's included in your insurance binder:

1. Property

Your insurance binder should include the risk you're insuring. The risk is what the policy covers, like a home or car. This portion of the document focuses on the specifics of the property you're insuring so that there's no question as to what's covered.

2. Terms of insurance

The most important aspect of your insurance binder is that it outlines the terms of your insurance policy. This makes it so you have coverage while you wait for the official contract from your insurance company.

3. Policy owner

This is also known as the named insured. The owner of the property or vehicle should have their name in the documents, as well as additional owners. For example, if a couple buys a home and it is in both of their names, they should both be listed as named insureds in the insurance binder. If you're purchasing an auto insurance policy, the leasing company would also appear in the document.

4. Deductible amount

Your insurance binder identifies the deductible amount for each type of insurance you have on your car or home. That includes liability, comprehensive and collision.

5. Coverage limits

Your insurance binder should outline the coverage types and limits that you and your insurer agree upon. That way, if something happens before your official contract arrives and you need to submit a claim, your insurance binder has the specifics of your contract.

6. Changes or additions

Changes or additions, also known as an insurance endorsement or rider, may also be mentioned. Whether you're purchasing auto or homeowners insurance, it's important that your coverage limits are clearly defined in your insurance binder.

7. Date of coverage

Your insurance binder should make the term of your insurance clear in the document. Also, there will be a date that your binder expires included in the document. It's important that you receive your official policy before that day to avoid a lapse in coverage.

8. Company and insurance agent

The document includes the insurance company name and the insurance agent who gave you the binder. It must identify the person who authorized the binder, which should be your insurance agent. There's also usually a disclaimer in this area that defines that the binder is subject to the terms of the policy language.

How do you get an insurance binder?

Your insurer usually gives you an insurance binder automatically after you agree on the terms of your insurance policy.

It can take a few days to process the paperwork and to complete underwriting. If your insurance agent doesn't offer you a binder, you should ask for one as temporary proof of insurance. An insurance binder also serves as confirmation of the discussed insurance plan.

Types of insurance binders

Your insurance agent will likely hand you an insurance binder for your property, homeowners and auto insurance policies. All types of insurance binders generally contain the same information. Here's what you should expect in insurance binders for different types of policies:

Homeowners insurance binder

A homeowners insurance binder ensures that you have proof of insurance for your home. When you first purchase a home, your lender usually needs proof of insurance. When the underwriting process is underway, insurers will give you a homeowners insurance binder that serves as proof of coverage. The document becomes void when you receive the official homeowners insurance contract.

For a home, the binder includes the address and the value of the property. This can also include the value of the contents if you're insuring a condo or apartment. You will also see the mortgage if appropriate.

Car insurance binder

When you buy a car, the dealership usually needs proof of insurance before you can drive it off the lot. If your final auto insurance contract isn't complete, your car insurance binder works as proof of insurance. This binder letter allows you to legally drive without the official insurance policy.

Details about the coverage types you decided upon with your insurance company will be included. For example, if you choose liability, comprehensive and collision coverages, the document should outline coverage details and deductibles. If you have a car loan, that amount may also be included.

What happens after my insurance binder expires?

If the set term included in your binder is approaching and you still haven't received your official policy from your insurance representative, you should reach out immediately. Your binder only offers proof of insurance until the time outlined in the document. It isn't equal to your actual policy.

An insurance binder is meant to be a short-term contract, so it's incredibly important that you get your insurance policy. You're at risk until you have a valid contract in your possession. You cannot use your insurance binder as proof of insurance if you already have your policy. After you have the policy, you can disregard your insurance binder.

Bottom line

An insurance binder is a compilation of important documents outlining your homeowners or auto insurance coverage. Insurance binders serve as proof of insurance before the official policy is drafted by your insurance agent. Meant to be short-term contracts, you can disregard your insurance binder once you've been handed your official policy.

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