Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager Chris Harrigan

UPDATED: Mar 10, 2022

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Key Takeaways

  • An insurance binder is proof of temporary insurance coverage while you wait for your permanent policy to start
  • Binders are commonly used to provide proof of coverage to secure a loan to buy a new car or house
  • Insurance binders are always temporary and typically last between 30 and 90 days

If you’re comparing the top car insurance companies and their rates, perhaps you’ve encountered a few unfamiliar or confusing terms. The search for the right automotive coverage is challenging. Insurance policies are often defined and written in complicated jargon, and there are several key phrases you should know. Today we’re going to be looking at insurance binders. 

An insurance binder is a document that provides proof of temporary insurance coverage. In this guide, we’ll explore the situations in which you might need an insurance binder, how you can get one, and how they work. 

Insurance Binders: A Closer Look

An insurance binder is a contract that temporarily provides you with proof of insurance coverage until your permanent policy is issued. 

These days, many insurance companies provide instant proof of insurance after you purchase your policy. However, it is not uncommon for the underwriting process to take several weeks. If you’re attempting to secure a loan to buy a new car or mortgage a home, the lender will require proof that you have insured their investment. 

Insurance binders resolve that problem by acting as placeholder policies until your permanent coverage takes effect.

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Insurance Binder Basics

As short-term placeholders for your permanent policy, insurance companies typically issue binders for durations between 30 and 90 days. Binders are intended to help you secure a loan while waiting for your formal policy to begin.

Insurance binders must define and establish the following:

  • The insured. The binder must name the policyholder.
  • Insurance company information. The binder must include the contact information of the company and the agent who sold the policy.
  • Binder number. The official account number needs to be included.
  • What’s insured. The asset or risk being covered must be defined in the binder.
  • Coverage and coverage limit. The amount of coverage must be defined and agreed upon by the insured and the company.
  • Any insurance endorsements. If you have riders attached to your coverage, they must be defined in the insurance binder.
  • Insurance rates. The binder should include the monthly premium fee.
  • Binder duration. The length of the binder’s term should be defined and included.
  • Lender information. If you are applying for a loan for your asset, the binder must document the lender’s information.
  • Terms and conditions. Your insurance binder’s disclosures, terms, and conditions.

Insurance binders provide coverage only until they expire. If you have not acquired a permanent policy when your binder expires, it will not be renewed, and your coverage will end. If you use an insurance binder to secure a loan, you will be asked to update your documents when the binder expires.

Not all insurance companies issue or accept binders. 

Types of Insurance Binders

Insurance binders are available in many forms and for various insurance coverage types. Some of the most common types of insurance binders are:

  • Car insurance binder. What is an insurance binder for a car? Binders are often helpful when buying a new car or applying for an auto loan. Coverage commonly includes liability, personal injury protection, collision, and comprehensive car insurance.
  • Homeowners insurance binder. A binder can be essential when you’re applying for a mortgage. The options often include liability, dwelling, contents, and medical payments coverage.
  • Commercial property insurance binder. This binder is often needed when purchasing a commercial property like an office building or retail store. Coverage options typically include building and contents insurance.

Different insurance companies may offer different types of binders, and your agent may provide you with more customizable options. 

What do insurance binders look like?

Insurance binders typically consist of a few pages of legal paperwork, but they can be as few as one page in length. If you do a Google image search for “insurance binder example,” you can get an idea of what one looks like.

The insurer will mail a hard copy to your address. And most companies will offer digital access to your binder.

Different Names for Insurance Binders

Insurance binder forms are often templates issued by the Association for Cooperative Operations Research and Development (ACORD). As such, insurance binders are often referred to as ACORD binders or ACORD insurance binders.

Besides ACORD binders, it’s also common to hear insurance binders referred to as:

  • Insurance policy binders
  • Title binders
  • Interim binders
  • Insurance cards

Some companies may even use phrases such as bind coverage or bind insurance. You may hear people refer to insurance binders as insurance certificates. This, however, can be slightly misleading. An insurance certificate refers to a formal policy, whereas an insurance binder does not guarantee coverage. Insurance binders always represent temporary coverage.

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When do you need an insurance binder?

Insurance binders are handy in several situations. 

Insurance binders are frequently necessary when financing a new car, home, or commercial property with a loan from a bank or other financial institution. Before they give you money, lenders typically require some proof of insurance per your financing agreement. If you do not currently have formal coverage, an insurance binder can work as a substitute to secure your loan.

An insurance binder can protect you if you’re in an accident and need to file a claim before your permanent policy takes effect.

It is wise to request an insurance binder from your provider if you’ve purchased a new policy that will not take effect for several weeks. 

Additionally, suppose you have a history of poor driving or have ever had your license or insurance revoked. In that case, you may be required to acquire an insurance binder until permanent coverage can be issued. 

How do you get an insurance binder?

Acquiring an insurance binder is a simple and easy process. All you have to do is request the document from your insurance company.

The company will send you a hard copy of your binder in the mail, but it is now common for companies to provide you with a digital copy. This is especially helpful if you need proof of insurance immediately.

If you’re requesting a car insurance binder, it’s typical for insurers to send your binder to you within minutes to ensure that you’re not left waiting for hours to purchase your new car.

What happens when your insurance binder expires?

Once your insurance binder term ends, your assets are no longer protected. 

It’s essential that you contact your insurance company to verify that your permanent policy is active and in place. And don’t be afraid to confirm that your coverage is correct and meets your needs.

You will additionally be asked to update your documents with your lender once your binder expires to provide proof of permanent insurance coverage.

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Insurance Binders in a Nutshell

An insurance binder is a legal contract that provides proof of temporary insurance coverage. The most common situations in which you might need an insurance binder include buying a new home or car through financing and purchasing a commercial property.

Insurance binders may also be required if you have a poor driving record or have ever had your license or insurance suspended. 

While many insurance policies are now issued immediately online, some plans may take weeks to prepare before they take effect. A binder can help you get approved quickly for your loan by providing you with immediate proof of insurance while you wait for your permanent coverage. 

Insurance binders are always temporary, and coverage is not guaranteed. Most binders are written to last between 30 and 90 days. 

If you’re shopping for auto insurance and a new car, and if you’re planning to finance your new vehicle with a loan, an insurance binder could be incredibly beneficial to you. Be sure to talk to your agent about your available options to help you get the best deal.