A few people know the basic purpose and need of supporting documents used during an insurance contract. They have problems regarding understanding the value of having an Insurance Binder.
In this piece of content, we will elaborate that what actually the Binder is? What are the purpose and need of using such writing? What a Binder should include and who does authorize it?
With proper and keen research, you will have all these things in simple words with a better sense of understanding.
Insurance Binder – An Easy Introduction
- 1 Insurance Binder – An Easy Introduction
- 2 Why do you need the Insurance policy Binder and what must be notified?
- 3 Mandatory elements in Binder
- 4 Binder and its Types
- 5 Insurance Binder must include
- 6 Misconceptions about the interim policy Binder
- 7 Final Words
It is sometimes simply called a “Binder” and also interim policy binder, insurance policy binder, and the title binder. It is just a temporary document consists of 1 to 2 pages. In simple words, it is a “Proof of Insurance”. This is an insurance contract that dissolves after getting the formal insurance policy. The contract is issued by an authority. It cannot be issued by an unauthorized person.
Furthermore, it has a time limitation for being used from 30 to 90 days. From such a document, you can easily pretend that you have got insurance of your concern, before getting the formal policy documents of insurance. Basically, it attests to the agreement between you and the insurer.
Why do you need the Insurance policy Binder and what must be notified?
It provides you the protection while agreeing to purchase any home or car. This is proof of coverage; whether you want to buy a property or vehicle by loan. Additionally, you must focus on the limitation of time and coverage because it will expire after the mentioned duration in your interim binder. So, do focus on getting the formal policy documents before it gets expired.
Mandatory elements in Binder
Many of the companies have a certain format of insurance binder. But they all contain specific elements which are necessary for the insurance company and you as an authentic document. The needed elements are given below:
- Basic details of policyholders like their name and address
- Name and address of the insurer
- Information of the agent, their contact, address, and name
- Terms and conditions of the agreement
- Limits of the coverage
- All the descriptions about insured goods
- The endorsements and deductibles provided
- Starting and ending date and time of the insurance policy
- The binder’s expiry date
- Policy Number
- Binder number
- Coverage detailsAll the details of basic aspects must be given in in it, including all these elements. It is necessary to express the agent, who has had issued the title binder. The binder number is for complete verification if needed in the future, which consists of certain letters.
Binder and its Types
According to the insurances, there are three basic types of policy binders including:
- Property insurance (commercial)
- Auto Insurance (car or any other vehicle)
- Homeowners insurance
We will have a detailed explanation of each category for the best understanding.
Property Insurance (commercial)
This sort of policy binder includes the coverage of contents and buildings. For example, if you buying a commercial place like any office building or any retail store, then this type of binding will be there.
Auto Insurance (car or truck)
Auto Insurance is all about the insurance of a car or any vehicle. If you buy a new car or you have applied for any loan to purchase your car, then an Auto Binder will be applicable.
This type of insurance policy binder contains the coverage of dwelling, medical payments, and liability coverage. Either you are buying a house and taking out a mortgage. This legal document is here to prove that you have had coverage on your home.
Insurance Binder must include
It includes the following things, which are compulsory to be stated with certain information.
The Insured (owners)
It means it will include the name of the owner of the property or car. If there is more than one owner or any co-owner is there, then all the names of the owners will be written in the binder for its rigidity.
The Insurance Company
The title Binder must include information about the insurance company. It will include the contact information, company name, and the address of the insurance company. Also, the type of coverage obtained will be mentioned.
The Expiry and Issuance date
The Binder must indicate the date of issuance and the expiry date of the insurance. If we talk about the validity of the binder, it ranges from 30 to 90 days. After that, it will be expired. Do focus that if your formal policy of insurance documents are not in your hands before the expiration of the binder; then there is a time to worry. The binder will not work anymore.
Time and the Agent
The Binder must cover the term of insurance; the date of the issuance of the insurance and the expiry date. In addition to this, it will include the name and contact number of the agent, whom the policy is authorized.
Liability, Coverage limits, add Deductibles
In this regard, the binder will contain the amount of liability insurance. Because it will restrict the limits for the owner and property.
The coverage type with each limit should be written in this document. And it will mention the deductibles for each portion of the insurance; whether it is a car, property, or home. The endorsements, if you have purchased, will be mentioned too.
The Risk and other aspects
The policy Binder will cite that what is insured, the risk. It will include the identification and information of any specific vehicle if it is an auto. The address, location, and the amount of insurance will be stated on the dwelling if it is for the property insurance. And if there is an apartment or any home, the number of contents will be there on the home insurance binder.
Misconceptions about the interim policy Binder
There are some confusions related to the binder, its role, validity, and issuance.
1) The insurance binder and Insurance certificate
These are not the same things. The insurance certificate is issued after the formal policy arrives with formal documentation. However, the Binder is proof of coverage and a temporary document for a specified time. It is to describe that the agreement of insurance is done. After this time of limitation, it expires and leaves no value.
2) Who can issue it?
In addition to this, people feel that anyone can issue the Binder. But it does not work like that. Only the authorized representative can issue the interim Binder like a specific agent. It could be issued by the insurance company by itself too. A broker without any authentication, cannot offer the Binder because he has no authority.
The Insurance Binder should be encouraged while doing any insurance contract; either it’s regarding your property, vehicle, or apartment. This is kind of proof of an agreement before the formal policy reaches you. It contains all the basic information and coverage, you would need in the next 1 to 3 months without the formal insurance documentations.