Need an Insurance Binder?

An insurance binder is a temporary issuance of proof of insurance that will "bind" or cover you temporarily until a formal policy is issued. The binder must contain your name as the insured, the limits of coverage in dollar amounts, what type of insurance it is, what is actually being covered (such as your car or home) and the company issuing the insurance. The beginning date must be evident. If there is a loan used to buy what is being insured, the lender (lienholder) information should be listed as well.

Types of Insurance Binders

• Most insurance requests begin with a binder. You would need a binder for the purchase of a car, to buy real estate, an RV, motorcycle, or boat. Binders also are given for pet insurance, personal property insurance, life insurance, renters contents coverage, disability insurance, long-term care, health and dental. You would receive a binder for professional types of insurance such as for building contractors, workers comp, errors and omissions, as well as a physician's malpractice insurance.

Example:  Homeowners Insurance Binder:

 

• The mortgage company requires that you obtain homeowner's insurance on the home you are purchasing. They will require you to pay for the first year's premium up front prior to closing and bring a "binder" showing that you have insurance. The binder is basically a certificate that your insurance agent will issue that shows you have insurance & what your coverage is & most importantly will list the mortgage company as a "loss payee" - that is, if there were a fire or other incident & the home was lost, the mortgage company would be covered. If you call your insurance agent & tell them you need a binder for a closing, they will know exactly what you mean.
  The mortgage company has requirements as to how much coverage you must have & how the loss payee clause should read. You will at least want it insured for the purchase price & most mortgage companies will require replacement cost coverage.