What is an Auto Insurance Binder?

1. What is an auto insurance binder?

   An auto insurance binder is a temporary insurance (and is valid proof of coverage until permanent issue of an auto insurance policy). Contrary to what many believe, an auto insurance binder can assume an oral form as well, but it is always in your best interests to request some form of writing as proof.

   The function of an auto insurance binder is to provide you with some form of insurance when there is a lag time between your auto insurance policy purchase and the time taken by the insurance company to furnish the requisite underwriting, documentation, and regulatory requirements. The protocols pertaining to auto insurance binder may differ in accordance with internal policies and procedures, but the overall purpose is to facilitate transition from temporary to permanent auto insurance.

   In addition to the auto insurance company, it may be possible that an agent authorized by the company may have the power to bind the company up to a certain amount. This amount, too, can vary from one organization to other.

   There are certainly some caveats that you must follow. First and foremost, verify the date of effectiveness. At times, the insurance agent may not be able to bind you immediately and the clauses will differ from one auto insurance binder to the other. Always verify the date of effectiveness, coverage criteria, policy limits, duration of the auto binder, and other documentation.

   What is an auto insurance binder?
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