Why do you need a home insurance binder?

28 May

An insurance binder is simply a temporary proof of insurance coverage while you are waiting for the formal issuance of a policy from your insurer. They often come into play when you are purchasing a new home and need to prove that you have the necessary insurance in place at closing.

A binder is often called bind coverage and is a set of legal papers that establishes an agreement between you and the insurance company providing insurance coverage despite the absence of a formal policy being ready at the time of closing. 

Details need to be correct

A home insurance binder usually lasts for 30 to 90 days and once it expires, it no longer provides coverage. However, by that time your insurance policy should be in place. When you are issued a binder, you should check the following details are correct:

  • Correct information regarding your personal info as well as all the information about the property to be insured is correct and up to date. 
  • Correct date for when the binder starts and ends as well as a date that your standard policy is to be issued
  • Be sure to follow up with your insurer for a copy of your actual policy as binders have a short life span. 

Why do you need a home insurance binder?

In most cases, a home insurance binder comes into play when you are purchasing a home but a full insurance policy has not been issued yet. Mortgage lenders require proof of insurance at closing to verify that their investment in your home is protected by the proper amount of insurance so you will need to show proof of coverage. An insurance binder can meet those requirements.

Anytime you are not issued a policy immediately, you should ask for a binder so you always have proof of insurance coverage. If you have to make a claim before your policy paperwork is issued, you can do so using the insurance binder. 

Insurance binders are not as common as they used to be, as technology has advanced, many insurers can issue policy documents online or email them to you within a few hours, making binders unnecessary. 

Details of a home insurance binder

An insurance binder acts as your only proof of insurance until the policy is issued so it must contain a certain number of details. In most cases, look for the following details to be included in a binder: 

  • Property details: The binder must include all the details of the property that is being insured. This usually includes the address of the property as well as the details of coverage levels.
  • Your details: The binder should include the personal details of all the owners of the house so if there are multiple owners, the insurance binder must include the details of all of them. 
  • Insurance company details: The mortgage country will obviously want the details of the insurance company protecting your home. The binder must have the name and address of the insurer and details of your agent if you have one. 
  • Coverage details: The insurance binder must also detail the type and amount of coverage on your property. It should spell out the different coverages and coverage limits for your dwelling coverage, contents, and liability. If any endorsements or riders are attached to the policy, those details must be included as well. 
  • Term and issuance date: The binder must have the term and issuance date of the actual insurance policy, not just the binder. This should include the date coverage starts as well as the length of the policy.

How do I get a home insurance binder?

Insurance binders are easy to get, in most cases your agent or home insurance company will issue one automatically if they cannot provide you with a policy copy. If they do not issue one to you automatically, simply ask your agent or insurer for one to be issued until you have the actual policy in hand. 

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