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What is a home insurance binder?

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When you are awaiting the formal issuance of a policy from your home insurance provider, an insurance binder serves as a temporary proof of coverage. While purchasing a house, certain kinds of insurance coverage are required even before you become an official homeowner. In case you do not have standard insurance coverage at the moment, your insurer will issue a home insurance binder.

Often referred to as bind coverage, a home insurance binder is a set of legal papers establishing the agreement between you and your insurer and providing proof of coverage in the absence of a formal policy. Insurance binders typically last between 30 and 90 days and no longer provide coverage after they expire. Since this is a temporary contract, a home insurance binder may also be called title binder, interim binder, insurance card or certificate of insurance.

When your insurer issues you a home insurance binder, make sure of the following details:

  • Correct and up-to-date information about the policy and the insured
  • Confirmation of the date when standard coverage is to be issued
  • Follow up with the insurer about issuance of policy because insurance binders last a short time

Why do I need a home insurance binder?

A good home insurance binder example is the scenario when you are about to purchase a house but your home insurance policy has not yet been issued and you cannot close the deal without proof of coverage. This is when you require an insurance binder. Mortgage lenders often need you to show proof of home insurance before approving the loan, and a binder provides proof of coverage when you still have not received your formal policy documents.

Besides helping you apply for financing and buy a property, a home insurance binder will also allow you to file a claim even if you do not yet have your formal policy. It is normal for the insurer to take a few days to complete the paperwork. You must always request a binder when you purchase new insurance but do not get your policy documents immediately.

Not all companies issue home insurance binders. When an insurance provider uses advanced technological tools to conduct business, policy documents are issued online and within a few hours and there is no need for a binder.

What does a home insurance binder include

When you are issued a binder, it will be your only proof of insurance coverage until you get your policy documents. Therefore, it must be confirmed that all the necessary details have been included in the binder. These are:

  • Details of the property: The insurance binder must include the insured item, also known as the risk. Details such as the address of the property, dwelling value coverage amount, and in case of an apartment or a condo, the insured personal property should be present in the binder.
  • Details of the insured: All the information about the policy holder must be included in the home insurance binder. This usually indicates the owner of the property, but if there are multiple owners, then the binder must have details of all of them.
  • Details of the insurance company: The home insurance binder must clearly indicate the name and address of the issuing insurance company, as well as the details of the agent through whom the policy was purchased (if applicable). To avoid any misunderstanding or error later, the binder must also include the exact type coverage for the property.
  • Details of the coverage: The amount of liability coverage on the property must be highlighted in the homeowners insurance binder, besides all other types of coverage for structure and personal property. The deductibles and limits for each kind of coverage must also be specified, along with important insurance endorsements that have been added to the policy.
  • Details of the term and issuance date: The binder must not fail to mention the length of the policy (six or twelve months) and the exact date on which it takes effect.

How to get a home insurance binder

The process of obtaining an insurance binder is easy and straightforward. In most cases, when the policy is not underwritten immediately, your home insurance provider will automatically issue you a temporary binder. If not, then you must request your provider to issue you one until you have the formal policy documents. Once you pay for insurance, always make sure you have some kind of proof of coverage if your policy does not take effect immediately.

Written by
Cynthia Widmayer
Insurance Contributor
Cynthia Widmayer is an insurance contributor for Bankrate and has over two years of experience as a personal finance writer. She covers home, car and life insurance products for Bankrate, The Simple Dollar and among others.
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