Here’s how coronavirus could impact your home and auto insurance.
What is an insurance binder?
Insurance binders are contracts of temporary insurance pending the issuance of a formal policy or proper rejection of the application by the insurer. The binder serves only as a temporary or interim policy until a formal policy is issued.
Though the binder is only an interim policy, it is a fully enforceable contract of insurance. Either an agent or an insurer provides this legal agreement as temporary evidence of insurance until a formal policy can be issued.
Not all term details typically are set forth in the temporary binder agreement. However, they are generally presumed. There must be an agreement between the parties before the binder goes into effect, which legally occurs when the following has been defined and agreed on:
- What’s being insured.
- The risk.
- The duration and amount of the coverage.
- The premium amount.
- The identity of the parties.
As a result of Stuart v. Pittman by the Supreme Court of Oregon in 2011, contracts that were made orally or in writing to be binding.
Parties who have a stake in the value of a property often ask for insurance binders as proof of coverage. The insurance binder is legally binding, provides peace of mind and serves as a documented summary of what has been insured.
Insurance binder example
An insurance binder for your car is often used to prove that you have obtained vehicle insurance as required by law or by a car dealership as proof of leasing or financing when purchasing a car.
If you have poor driving history or ever had your license or insurance suspended, a temporary insurance binder may be required to serve as proof of coverage until a permanent policy can be issued.
A home insurance binder is used to prove coverage on the property and is most commonly used when purchasing a new property or when proving to the lender that the property liability is covered.
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