Insurance Binder: What Is It? When Do You Need One?
An insurance binder provides temporary evidence of insurance coverage before a formal insurance policy is issued.
When you take out a loan to purchase a car, home or commercial property, the lender typically requires you to prove you have insurance coverage in place for the asset you're buying. However, it can take weeks to get through underwriting on a new insurance policy. An insurance binder serves as proof of coverage while the full policy’s approval is pending. It usually takes only a couple of days to get an insurance binder.
While you wait for a new policy, the insurance binder specifies all the protections for which you are covered, as well as any coverage limits, deductibles, fees and terms and conditions. Insurance binders usually last 30–90 days and will not cover you after they expire, so it's important to follow up with your provider and ensure you've been issued a formal insurance policy.
What is an insurance binder?
An insurance binder is a temporary insurance contract that provides fully effective insurance coverage while you wait for the formal issuance — or, in some cases, rejection — of an insurance policy.
An insurance binder is a written legal agreement between you and the insurance company. It provides proof of insurance for a certain period, usually until a standard policy is issued.
The insurance binder will not look like a physical binder. It's simply a few pages of legal paperwork that identifies all the terms and conditions of your temporary insurance contract. The expiration date of an insurance binder is usually within 30–90 days of when it was issued. Upon expiration, the insurance binder will no longer provide you with insurance coverage.
Many insurance binder forms or templates are issued by the Association for Cooperative Operations Research and Development (ACORD), a nonprofit that provides insurance companies with data and implementation standards. As a result, you may hear an insurance binder referred to as an ACORD binder or ACORD insurance binder.
An insurance binder may also sometimes be referred to as:
- Insurance policy binder
- Title binder
- Interim binder
- Insurance card
Furthermore, insurance companies may use phrases such as “bind coverage” or “bind insurance,” which similarly mean the insurer is committed to, or bound by, an agreement to assume coverage prior to policy issuance.
Types of insurance binders
Insurance binders can come in several forms for different types of insurance, including:
- Auto insurance
- Homeowners insurance
- Commercial property insurance
Each type of insurance binder provides different coverages, depending on what you are insuring and any minimum requirements in your state.
Type of insurance binder | Often required when you ... | Common coverages included |
|---|---|---|
| Car insurance binder | Buy a new car or apply for an auto loan | Liability, personal injury protection and collision and comprehensive coverage |
| Homeowners insurance binder | Buy a house and take out a mortgage | Liability, dwelling, contents and medical payments coverage |
| Commercial property insurance binder | Buy a commercial property, such as a retail store, office building or storage space | Building and contents coverage |
What's in an insurance binder?
Insurance binders identify who and what is insured. The insurance binder should specify or define:
- Insurance binder holder and/or name of insured
- Insurance company and agent contact information
- Binder number
- Asset or risk insured
- Coverages and coverage limits
- Deductibles
- Insurance endorsements
- Premium, or any required payments and fees
- Binder term, including effective and expiration dates
- Appropriate lender if your asset is secured by financing
- Disclosures and terms and conditions
When do you need an insurance binder?
If you need to show proof of insurance coverage before a formal policy has been issued, you will need an insurance binder. The binder can help you secure a loan for an asset.
Additionally, the insurance binder will help protect you after an accident if you need to file a claim prior to receiving your formal insurance policy.
If you purchase a new car insurance policy
You should always request an insurance binder to maintain proof of insurance prior to obtaining the actual car insurance policy. The insurance binder can help you verify that the coverages you have applied for are accurate and ultimately confirm you are insured.
If you buy a new home or car
When closing on a house, a homeowners or home insurance binder helps finalize your mortgage by providing temporary evidence of insurance. Similarly, a lender may require an auto insurance binder to approve an auto loan on a new car.
Today, some insurance policies can be issued online within minutes. However, depending on your circumstances, such as your driver profile or the particular home you're buying, it may take several weeks for an insurance policy to be approved. As a result, insurance binders are typically issued for 30 days but can last as long as 90 days.
Insurers may send insurance binder letters via mail, but if you need proof of bind coverage immediately, you can request electronic delivery by email or fax.
What to do after your insurance binder expires
After your insurance binder expires, you should verify with your insurance company that your new policy has been issued. Otherwise, you will lose coverage and be at risk for any accidents that occur while you are uninsured, as insurance binders are only meant to serve as temporary coverage.
Never hesitate to follow up with your carrier about the status of your insurance policy, and be sure to request a copy of the new insurance policy contract if you do not receive one when it is approved.