By now you have contacted your insurance representative with the car information and the type of coverage you want, but it will likely take a week for the experts to finalize the official contract. Does that mean you can’t have your dream car for a whole week because you don’t have insurance? Not always. You can have one, but you’ll need a car insurance binder.
Postpone. What is an insurance binder?
Honestly, it’s not that complicated. We will destroy it.
An insurance binder basically proves that there is a formal contract in position between you and the insurance company. It is a legal short-term replacement until your official insurance coverage is issued. The same terms defined in your plan are also legally enforceable as a binding component of insurance.
Do you have the right insurance coverage? You could save hundreds! Call an insurance professional today!
But why is it called a binder? Really more like a safety net? Connection? A link? Well… yes, yes and yes. More importantly, it is called a binder because it is legally binding. You are legally covered by an insurance contract just as if the current official plan had been approved by the financier.
Now the easy part—there are only 2 types of insurance binders.
This is a short list, but each type of fastener comes with its own potential situations and requirements that you need to keep in mind. Let’s dig deeper.
Depends. If your package is ejected instantly, you don’t need a binder. You are good to go!
However, if you are buying a new plan and the financing process is likely to take some time, definitely ask for a binder. You want to make sure that you are protected when a plan is written. Your insurance company may issue a binder soon, but you should keep asking.
Reflect on the dream car situation we discussed earlier. Thanks to blazing fast internet speeds, insurance providers can usually set up and ship your official package electronically in minutes. But if for any reason there is a delay in the financing process, the insurance binder ensures that you are protected from the moment you buy your dream car package until the time the financing process is complete.
Basically, the binder ensures you are not economically responsible for any regrettable accidents. Here are a few examples to give you a photo of what it might look like:
Worst situation? Your real plans haven’t been issued, you don’t get a binder, and you get into a car crash because of the dream car. Guess what? You are responsible for the problem, and your financial resources are working. No!
Best case situation? You currently have an insurance binder. You publish it and you have a duplicate of it in the car with you. The same sad accident happens—but this time you can show that you are fully and legally covered by your insurance company. This is a much better situation, isn’t it?
When buying a house? Well, lenders often need proof of homeowner’s insurance before they authorize your mortgage—they need to make sure that their financial investment (also known as your home) is adequately protected.
Suppose you have currently purchased homeowners insurance and your insurance representative tells you that it will take an expert 3 days to certify the plan. If you are wise enough to request a binder for those 3 days, the binder can provide the lender with proof of necessary insurance.
Your lender will review the home insurance binder to ensure that the insurance coverage meets their requirements. You are now one step better at completing the closing process on your new home. Happy!
If you don’t have proof of homeowner’s insurance, you can anticipate delays in your home loan process, and other buyers may be able to buy your dream home instead of you. Don’t let that be you!
The insurance binder includes a recap of the exact same coverage as your pending contract. Here’s a breakdown of what to see:
Fundamental. First, the binder must clearly specify the name of the insurance company, the type of coverage (home, property or car), and the legal name of the representative who licensed the plan.
Stake. The insurance binder must define exactly what is covered. If it’s a car insurance binder, the make, model, and vehicle identification number (VIN) are very important. If it is a property owner or industrial property insurance binder, the address and total amount of insurance money must be clearly stated.
Period. The insurance binder must state the day the binding takes effect and the day it ends.
Coverage Quantity. The insurance binder must determine the limits of coverage, the amount of insurance deduction, costs, and requirements for each area of insurance.
Premium Quantity. The insurance binder must consist of the amount of the premium (and other costs) and the day the transfer is to be sent to the insurance company.
Guaranteed People. The insurance binder must include the legal name of the insured person. Unless there is a co-owner, the guaranteed name is usually the owner of the property. The binder must also list the home loan or lien holder—unless you’re a superstar buying their home for cash!
For a guarantee (and we all need one!), double-check exactly what’s in your official plan by reading your docket. Make sure the information matches what you discussed with your representative.
The insurance binder is valid for the specified call written on the binding document. Usually, the expiration day is within 30-90 days from when you purchased your package.
But don’t just get it and ignore it! Know your expiration days and pay attention to the schedule. If your binder is about to expire and you still haven’t received your official package, contact your representative and ask for your package documents. Or, you may not be fully insured—and you want to address any issues with your plan as soon as possible.
Once the actual plan is issued, the insurance binder is dissolved and you are ready to go.
If you’re wondering how to get an insurance binder (or if you really need one), worry not. It’s as easy as logging in with one of our Authorized Local Service (ELP) companies and requesting it. Make sure you work with a reliable independent representative who will help you find the right protection for your situation.