An insurance binder is a document that serves as temporary proof of insurance coverage until a policy can be issued.
Your insurance binder will include details like the type of policy, coverage limits, deductible amounts and more. Basically, it should match the terms you and the insurer agreed to when you applied for a policy.
You can use an insurance binder to provide evidence of insurance coverage to a lender, the DMV, the police, or any other organization that requires such proof while you wait for your actual policy to arrive.
This article covers everything you need to know about insurance binders, including:
- 8 items included in most insurance binders
- How to get an insurance binder
- Homeowners vs. car insurance binders
- What happens when an insurance binder expires
What does an insurance binder include?
An insurance binder includes all of the essential information about an insurance policy, like its coverage limits and deductible amounts. It may not include some specific wording that will be in your actual policy, but it will provide a summary of the key points. Here are eight items included in most insurance binders:
1. Terms of insurance
The most important aspect of your insurance binder is that it outlines the terms of your insurance policy. This makes it clear to anyone who needs to know that you have coverage while you wait for the official contract from your insurance company.
2. Policy owner
Your insurance binder should list the policy owner, or named insured, too. It should also list any additional owners. For example, if a couple buys a home and it is in both of their names, the insurance binder should highlight both of them. If you're getting an auto insurance policy for a financed vehicle, the lender should appear in the document as well.
3. Coverage limits
Two other components your insurance binder should outline are the coverage types and limits that you and your insurer agreed upon. Thanks to this, if something happens before your actual policy arrives and you think you might need to submit a claim, you can refer to your binder for the specifics of your contract.
Something else an insurance binder includes is the risk or property the policy will cover. In many cases, this is a car or home, though there are lots of other possibilities, too, like a motorcycle or a boat.
5. Deductible amount
Your insurance binder will identify the deductible amount for each type of insurance you have as well. If you bought car insurance, it might show your liability, comprehensive and collision coverage deductibles, for example.
6. Changes or additions
Changes or additions, also known as insurance endorsements or riders, may also be mentioned in your insurance binder. Whether you're purchasing auto or homeowners insurance, it's important that both are clearly defined in your insurance binder.
7. Date of coverage
An insurance binder should make the term of insurance clear. The document should also make clear the date your binder expires. If you don’t receive your official policy before that day, contact your insurer or agent.
8. Company and insurance agent
Your binder will include the name of the insurance company. It also must identify the person who authorized the binder, which should be your insurance agent. There's usually a disclaimer in this part of the text that says the binder is subject to the terms of the policy language, too.
How do you get an insurance binder?
Most insurers will send you an insurance binder automatically after you agree on the terms of a policy.
It can take a few days to process the paperwork and to complete underwriting. If your agent doesn't send you a binder, ask for one. Not only does it serve as temporary proof of insurance, but it also serves as confirmation of your insurance plan.
Types of insurance binders
You may receive an insurance binder for any type of insurance policy. Although all of these documents generally contain the same information, here's what you can expect to see in homeowners and auto insurance binders:
Homeowners insurance binder
A homeowners insurance binder ensures that you have proof of insurance for your home. This is important, as a lender will usually ask for proof of insurance when you go to purchase a home.
Once the underwriting process is underway, your insurer will give you a homeowners insurance binder that serves as proof of coverage. That document becomes void after you receive the official homeowners insurance contract.
Your home insurance binder should include the address and the value of the property. It may also include the value of the contents if you're insuring a condo or apartment.
Car insurance binder
When you buy a car from a dealership, they’ll usually require proof of insurance before letting you drive your new set of wheels off the lot. If you don’t yet have your final auto insurance policy, you can use your car insurance binder in this situation instead. You can use your binder letter in other situations while waiting for your official insurance policy, too.
Your car insurance binder will include details about the coverage types you decided upon when you bought your policy. For example, if you chose liability, collision and comprehensive coverage, the document should outline limits and deductibles for those coverage types.
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 provider, contact them. Your binder only offers proof of insurance until the date specified in the document.
An insurance binder is only meant to serve as temporary proof of insurance coverage, so you want to get your actual insurance policy as soon as possible.
Also, you can disregard your insurance binder after you get your policy. You can’t use your binder as proof of insurance once you have a policy in hand.
An insurance binder compiles the most important details of a homeowners or auto insurance policy. You can use your insurance binder as proof of insurance coverage until your actual policy arrives.
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