What Is An Insurance Binder?
An insurance binder is temporary proof of coverage. Some lenders require one when you finalize a vehicle purchase or loan before your policy is fully issued. Sources reviewed for this article include Ontario’s Insurance Act, FSRA’s auto-insurance guidance, RIBO’s consumer resources and the Ontario Automobile Policy.
An insurer, or someone authorized to act for an insurer, can provide an insurance binder. In some cases, the binder acts as a temporary insurance contract until you receive the actual policy.
An insurance binder is not:
- A receipt confirming that you paid for insurance
- The same thing as an insurance quote
After the insurer issues the insurance policy, the policy normally replaces the binder.
How To Check Whether An Insurance Binder Is Valid
Only an insurer or authorized representative can bind the risk. Ask for written confirmation stating when coverage begins, its conditions and when the formal policy or other proof will follow. A payment receipt is not proof that you are covered.
Check:
- Whether the person who provided the binder was authorized to bind coverage
- The effective time of coverage
- What’s covered
- When coverage expires
- Whether the person or company requesting proof will accept the binder
Some lenders and other companies have their own requirements. They might ask for specific wording, coverage or higher limits.
A valid insurance binder states that coverage is in force, not just that you applied for it. If you notice a mistake or discrepancy, contact the insurer right away and ask for confirmation in writing.
Types Of Insurance Binders
Auto Insurance Binder
An auto insurance binder confirms that you have insurance and lists the coverage provided. Don’t assume that Collision and Comprehensive are included if those words aren’t in the binder.
Property Insurance Binder
A property insurance binder confirms the type of property insurance you have. It may include what’s covered, liability limits, deductibles, conditions and mortgagee information.
Commercial Insurance Binder
A commercial insurance binder confirms the type of commercial insurance a company or self-employed person has. It may cover liability, property, business interruption or a combination of coverages. Make sure the coverage you need is listed on the binder.
Certificate Of Insurance
A Certificate of Insurance summarizes coverage but isn’t usually the actual insurance contract.
Things To Consider About Insurance Binders
You may be asked for proof of insurance before closing a real estate deal. Banks and other lenders may also ask for an insurance binder when you get a loan to buy or lease a vehicle.
They may require the binder to list them as an interested party, such as a lender. They might also require specific coverage limits, deductibles or wording. If you receive an insurance binder, make sure it says what you expect before sending it to whoever asked for it.
Provincial And Territorial Rules
Rules about insurance binders and acceptable proof of insurance can differ by province and territory. Check the requirements where you live.
What Is Considered Proof Of Insurance In Ontario?
An auto insurance binder isn’t the same as the insurance card Ontario requires drivers to carry or approved electronic proof.
Read More: What Is Considered Proof of Insurance in Ontario?