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What is an Insurance Binder and Do You Need One?

Last updated 03/18/2024 by

Jacob Wilson
Summary:
Insurance protects you against all kinds of disasters. In some cases, insurance is required. Landlords, for instance, require renter’s insurance within lease agreements. However, it takes time to process a newly purchased policy, and you’ll want to be protected during this time. This is where an insurance binder comes in.
An insurance binder is one way to stay protected between first purchasing a new insurance policy and activating that policy. These documents will be much simpler than your full policy, but that doesn’t make them any less important.
Because insurance binders are so important, you should know exactly what goes into them. By understanding these details, you’ll know exactly what you need for coverage until your full policy is ready.

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What is an insurance binder?

An insurance binder is a contract between you and your insurance company that acts as temporary proof of insurance. Only authorized representatives issue these binders. This binder acts as proof of insurance for items such as your home, car, and other pieces of property in addition to outlining the basic coverages that appear in your contract.
The insurance binder lasts until a provider issues or rejects a formal insurance policy. The document will also be subject to all the terms of the pending contract unless explicitly noted.

Does an insurance binder expire?

Your insurance binder shouldn’t expire for about 30 to 60 days (the exact term length is on the document). Ideally, you’ll receive your full policy before this time. In this case, the binder will expire once the actual policy documents are available to you.

What happens if a binder expires?

If your insurance binder expires and you haven’t received your full policy, you may not be insured. If your binder is about to expire, follow up with your insurance agent to make sure that your policy will arrive before you lose your temporary proof of insurance.

What does an insurance binder include?

The insurance binder should include several components of insurance coverage. It can be hard to know what your binder handles, but there are common features that all of them should have. Note that this is not a complete list for every insurance binder, as your binder could have other components.
  • Risk. The risk is the insured property included within the insurance policy, such as cars, homes, and other important property.
  • Liability. In addition to what property is protected, you’ll see the amount of liability insurance provided and its limits.
  • Deductibles and coverage limits. The binder should cite deductibles for insurances on your car, home, and other property as well as the types of coverage and their limits. The binder may also include any endorsements you’ve purchased.
  • The insureds. This includes all insured members covered by the policy.
  • The insurance company. This would be the name of the insurance company that provided the policy. It should also state the type of coverage purchased and the coverage amount.
  • The term. The term of the insurance. This should include the date the insurance goes into effect and the date it will expire.
  • The agent. This is the agent who authorized the policy clearly listed.
  • A disclaimer. Some binders may include disclaimers that will state they are subject to the terms of the policy’s wording.

What isn’t included in the binder?

Though your binder will include a lot of valuable information, it may not include the finer details of your full coverage, such as special limits of home plans. The insurance binder is temporary evidence that acts as an overview of your actual insurance policy and is by no means a replacement for your full policy. Do not treat your insurance binder as a permanent policy! If you require a part of your plan that your binder doesn’t have, we recommend contacting your provider as soon as possible.

Pro Tip

Remember to check all the components when you receive your insurance binder. If you feel something important is missing, be sure to contact your insurance provider. This will minimize any potential problems if you need to make a claim before your official policy documents arrive.

Who needs an insurance binder?

An insurance binder is helpful whenever you purchase a plan, as the binder provides proof of your future insurance coverage. This is especially helpful when you plan on purchasing a new car or a new home.

Home insurance binder

A home insurance binder proves that you’ve insured your home. If you’re closing on a new property, your mortgage lender or company may be require this information. Home insurance binders should include the amount of home insurance on the building, the deductible, and the mortgage clauses.

Car insurance binder

A car insurance binder proves that you’ve insured your car. When purchasing a new car, a leasing firm, dealership, or finance company may require your insurance binder before completing the transaction. Car insurance binders should include collision, comprehensive coverage, and liability insurance, as well as each of their deductibles. You should also find clauses that apply to finance companies.
Because of the numerous insurance options available, it may be difficult to know when you’ve found the right one. Luckily, SuperMoney has comprehensive reviews of all major insurance providers, so you barely have to lift a finger!

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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What is a binder check for health insurance?

Health insurance binders differ from auto or home insurance binders. A binder check (or binder payment) is the first month’s premium of your insurance policy. Some insurance providers require this payment before the policy activates.

When will I receive an insurance binder?

Depending on the company, getting your insurance binder can be a quick process. Most companies issue you a binder right away upon request. If your provider does not give you a binder right away be sure to request one as soon as possible.
Once you issue a request, you can get a digital copy of your insurance binder in minutes or a couple days. Many providers still offer physical copies as well, but these can take longer to acquire than their digital counterparts.

What if I never receive the full policy?

It’s important to get a copy of your policy as soon as possible even when you have your insurance binder. Insurance binders typically expire after 30 to 60 days, so keep an eye out for your policy. If your binder expires before you receive your formal policy, there could be serious issues with your coverage. To avoid being at risk, follow with your provider and ensure your formal policy is issued.
If the issue persists, you may need to contact your state insurance commissioner to figure out what’s going on. Your agent should help resolve most problems and deliver your full policy within a couple of weeks.

Is an insurance binder the same as a certificate of insurance?

An insurance binder and certificate of insurance are very different! An insurance binder binds your coverage and creates a contract until the insurance policy is issued. A certificate of insurance is a proof of insurance warranting that you possess coverage for a specific period. Most businesses request this certificate when provide services to each other. This certificate acts as proof that the other business has any necessary coverage.

Example case:

You purchase a new home without any insurance, so you make a last-minute call. While the insurance company provides a quote and confirms the policy for the new residence, the paperwork takes a little longer to process.
Your real estate agent informs you that proof of insurance is required at the time of closing. You need a legal document that explains your insurance so the agent can complete the closing on your home. To complete the closing, you ask for an insurance binder from your provider.
In this scenario, insurance binders ensure you have access to proof of insurance in a situation where you can’t quickly get your policy. Without one, it may be difficult to get proof of insurance in time.

Key Takeaways

  • An insurance binder acts as your proof of insurance while your full policy is processed.
  • This binder also helps when you need to show proof of homeowner’s or auto insurance quickly.
  • If your insurance company doesn’t give you a binder right away, be sure to request one from them as soon as possible.
  • Once you have your policy, your insurance binder expires.
    • Your binder also lists an exact term limit, usually between 30 and 60 days.
  • If you haven’t received your new policy and your binder expires soon, contact your provider. If it expires and you don’t have your policy, there may be serious issues with your coverage.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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