A car insurance binder is a form from your car insurance company that provides temporary proof of insurance while the insurer verifies your data. Thanks to a car insurance binder, you can legally drive your vehicle with insurance coverage while the underwriting process is underway.
Once the underwriting process is complete and the insurance company has verified your information, you will receive your full car insurance policy and no longer need your binder.
A car insurance binder is also known as a binder letter.
Do I Need an Auto Insurance Binder Letter?
An auto insurance binder is helpful for drivers who need to start driving their vehicle before the underwriting process is complete. In this situation, you can request an auto insurance binder letter from your insurance agency (although they may provide one automatically).
That binder letter will provide proof of insurance if you ever get pulled over. It will also provide coverage if you need to make an insurance claim. You’re covered by insurance when you have a binder letter from your insurance company.
Ultimately, an auto insurance binder letter is a type of temporary car insurance coverage you receive while the underwriting process is being completed by the insurer. You need to hold onto your binder letter until you get a permanent proof of insurance card.
Remember: if you don’t have an auto insurance binder letter in your possession while waiting for final approval from your car insurance company, then you do not technically have the required auto insurance needed to drive your vehicle. In this situation, you’re an uninsured motorist with no coverage and it’s illegal to drive on any public road in the United States.
What’s the Difference Between an Auto Insurance Binder and a Regular Auto Insurance Policy?
Typically, an auto insurance binder provides different coverage from your full auto insurance policy.
During the underwriting process, the insurance company could discover information that changes your rates. You might receive less or more coverage than what’s outlined in your binder letter. Your rates might increase or decrease.
How to Get a Car Insurance Binder Letter
If you’re signing up for a car insurance policy from a company, then they’ll likely provide a car insurance binder letter once they’ve approved basic information on your application.
Binder letters are particularly common when buying car insurance online. If you sign up for car insurance online, then you may be offered instant proof of insurance in the form of a binder letter. You can print off that binder letter and be legally covered by your insurance company. This letter is identical to the one you receive in the mail from an insurance company during the underwriting process.
If you applied for insurance and have not received a binder letter, then contact your insurance company immediately. Your insurance company can mail a letter to your address, email a letter for printing, or make a letter available to be picked up at their local office.
Auto Insurance Binder Letters Can Expire
Temporary auto insurance binder letters may expire, which means you won’t have any coverage when driving. Make sure you check the letter to ensure it’s valid for all days on which you plan to drive.
Typically, the auto insurance company gives themselves plenty of time to complete the underwriting process, which means your binder letter should easily remain active until you receive your full policy. However, it’s important to check the expiry date to make sure – especially if your underwriting process is taking a long time.
What Will the Insurance Company Discover During the Underwriting Process?
You need a binder letter while you wait for the insurance company to complete the underwriting process. What exactly is the underwriting process? What is the company waiting to find out? Here are some of the things the car insurance company will explore during the underwriting process:
- The type of vehicle you drive
- Your driving history
- Your credit score
- Your address
- Whether or not you have an active car insurance policy
- How long you’ve been driving
- The driving history of other licensed drivers in your household
Once the insurance company has discovered this and other information, your policy will be approved or denied, and you’ll receive your complete insurance card in the mail. At this point, you can discard your insurance binder. You’re now fully insured under your normal auto insurance policy.