What is an Insurance Binder?

An insurance binder is a temporary contract that outlines the details of an insurance policy that is used to cover the insured while an insurance company processes the paperwork for an official policy. Insurance binders are typically used to provide proof of insurance to a third party, such as a lending company.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Feb 15, 2022

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What You Should Know

  • An insurance binder is a temporary contract that gives the binder holder coverage for their property for a certain amount of time, usually while the insurance company processes paperwork for the insurance policy.
  • Insurance binders are typically used to provide proof of insurance to a third party, such as a car dealer or finance company.
  • The insurance binder includes information, such as the insured property and people, coverage types and limits, deductibles, and other details of the official policy.

If you are getting ready to buy a new car (or home), you may need to provide the seller or finance company with proof of insurance. However, some auto insurance companies take a couple of days to process paperwork for a policy. Therefore, the company may issue an insurance binder for you to use temporarily.

Keep reading below to learn the insurance binder meaning, what is included in an insurance binder, and where to get an insurance binder when you need it.

Enter your ZIP code into our free quote comparison tool above to find auto insurance coverage and receive proof of insurance, such as an insurance binder.

What is an insurance binder?

An insurance binder is a temporary contract that gives the binder holder coverage for their property for a certain amount of time, usually while the binder holder is waiting to hear whether their official policy is approved or rejected.

The insurance binder is simply a few pieces of paper that outline the legal specifics of the contract, including the policy terms, such as coverage limits, deductibles, and policyholders. An insurance binder typically expires within 30-90 days from when it is issued.

Insurance binders can go by many names. Because many of them are issued by the Association for Cooperative Operations Research and Development (ACORD), they may be called ACORD insurance binders. Other names include insurance policy binders, title binders, interim binders, insurance cards, and certificates of insurance. Insurance companies may also refer to this coverage as bind insurance.

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What kinds of insurance binders are there?

Insurance binders can come in many forms for different types of insurance. For example, you could receive a car insurance binder, homeowners insurance binder, or commercial insurance binder (and more).

What is an insurance binder for a car vs. a home? The only difference between these insurance binders is what is listed as the insured in the contract. For example, an auto insurance binder will list a car as the insured, while an insurance binder for home insurance will list a home as the insured.

What is included in an insurance binder?

An insurance binder will include all the essential parts of a typical insurance policy so that all parties understand exactly what kind of coverage is being offered.

The binder will include the insured property. For example, if it is for a car, the binder will list the vehicle make, model, and VIN. However, if it is for a home or other property, it will list the property address, property value, and the value of any contents that are insured.

An insurance binder will also list any named insured, such as the property owner, co-owners, or other additional insureds. In addition, the insurance binder will include information for finance companies, mortgagees, or lien holders if the property is financed.

In addition, the insurance binder will list any types of coverage with the coverage limits, including liability coverage details. For example, if the coverage has a deductible, the binder will list the deductible amount. It will also list any endorsements if you have purchased them for your regular policy.

The last pieces of information should include the insurance company’s name, the term of coverage (the date it goes into effect and the date it expires), and the name of the agent who authorized the insurance binder.

Who needs an insurance binder?

Let’s take a look at a summary of when you may need to get an insurance binder:

When You Need Insurance Binders
Type of Insurance BinderWhen You Need an Insurance Binder
Car Insurance BinderWhen you buy a new car or apply for a car loan
Homeowners Insurance BinderWhen you buy a new house or apply for a mortgage
Commercial Insurance BinderWhen you buy a commercial property
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An insurance binder is typically used to prove to a third party that you have insurance. Therefore, finance companies may require an insurance binder if they are going to let you lease a car or receive a car loan. The insurance binder will have to include all the coverages and clauses required by a dealer or finance company.

The same thing may be required by lenders or mortgage companies when buying a new home or commercial property. Therefore, the insurance binder will need to include coverage limits and mortgage clauses, plus anything else required by the other parties involved in the transaction to prove that you have adequate coverage before closing.

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How do I get an insurance binder?

You should receive an insurance binder whenever you request to buy an insurance policy. For example, if you buy an insurance policy, it may take the insurance company a few days to get all the paperwork processed for the official policy. Therefore, an insurance binder can serve as your temporary proof of insurance.

If your insurance company doesn’t automatically provide you with an insurance binder, you should be able to ask your insurance agent to provide you with one.

How does an insurance binder work?

Let’s see an insurance binder example to understand how they work.

Say Megan has to buy a new car. Her car loan company tells her that she must provide proof of insurance to take the vehicle. However, the insurance company needs a few days to process the paperwork for the official policy.

Since Megan wants to drive the car off the lot before the policy is issued, she asks her insurance agent to provide her with an insurance binder that outlines the details of her policy and provides coverage until the policy is issued. Megan uses the insurance binder to prove that she has adequate coverage for her loan company.

The loan company allows Megan to take the car, and once Megan receives her official car insurance policy, she disregards the insurance binder since it is no longer needed.

If you need to buy an auto insurance policy and receive proof of insurance, such as an insurance binder, for a new car, enter your ZIP code into our free quote comparison tool below.

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