A home insurance binder is a temporary contract between you and your insurance company. It provides coverage while you wait for the insurer to complete the formal underwriting process and issue your official policy.
Though not all insurers issue insurance binders, if you’re closing on a home and have a mortgage, a binder can often serve as the required proof of coverage. Further, a home insurance binder makes you legally eligible to file a claim if any covered loss occurs before underwriting on your formal policy is complete.
What is included in a home insurance binder?
At minimum, a home insurance binder typpically contains basic policy information, such as your insurer’s name and contact information, the property address, and your policy number.
In most cases, it also includes an overview of specific policy details, including the following information.
Named Insured and Loss Payee
An insurance binder includes the “named insured,” or the specific individual(s), such as the homeowner and a spouse, fully covered by all policy parts. An entity, such as an LLC, can also be considered the named insured.
Home insurance binders also usually list a “loss payee,” or an individual or entity with an insurable interest in the property. Mortgage lenders are commonly named as loss payees as they have a financial interest in the property until the mortgage balance is paid.
Effective and expiration dates
Home insurance binders are temporary and typically include an effective date and an expiration date. Most binders last between 30 and 90 days, or until your final policy is effective.
Tip: If you’re closing on a home, always ensure the binder reflects an effective date that coincides with your closing date. This can help you avoid unnecessary delays.
Type of insurance coverage
Home insurance policies often include multiple types of coverage. Insurance binders list each type of coverage and any endorsements added to enhance or modify the policy.
For instance, a binder for an HO-3, a standard home insurance policy, will likely include details about the following types of coverage:
Covered perils
Insurance binders commonly outline the perils or events covered by the policy. There are several types of home insurance, and coverage deals vary. However, a standard homeowners insurance policy provides financial protection against various perils, including storms, theft, fire, and vandalism.
Want to know more about what’s included in a policy? What does home insurance cover?
Coverage limits and deductibles
When you purchase a home insurance policy, you'll need to choose the following:
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Policy limits. The maximum amount your insurer will pay after a claim.
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Deductibles. The amount your insurer will deduct from a claim check, or your minimum out-of-pocket expenses after a claim.
Your insurance binder should include the limits for each type of coverage and applicable deductibles.
Learn more: Policy Limits and Deductibles
When do you need a home insurance binder?
The most common reason you may need a home insurance binder is if you are using a mortgage to purchase a property. Mortgage lenders generally require borrowers to show proof of insurance at closing.
If your policy is not fully underwritten at closing, your lender will likely accept a home insurance binder as proof of coverage.
Is a home insurance binder the same as a certificate of insurance?
No, a home insurance binder differs from a certificate of insurance (COI).
A home insurance binder is a temporary policy to bridge the gap between the policy purchase and the completion of formal underwriting.
COIs are also commonly used for business insurance. Contractors and other professionals provide COIs to their clients as proof of insurance. Binders may be used for both business and personal lines insurance policies.
A COI lasts for the duration of your policy term and outlines the coverage included in your official, fully underwritten homeowners insurance policy. It contains much of the same information as an insurance binder, including types of coverage, limits, deductible amounts, and your premium. You’ll also see any discounts you qualify for, such as multi-policy, home security, or military discounts.
How to get proof of insurance
If you need proof of insurance, you can often provide it in one of the following ways:
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Home insurance binder. If you need proof of coverage before the policy is officially issued, your insurer may issue a binder document.
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Policy declaration page. All insurers provide a policy declaration page when issuing various insurance policies, including home and auto insurance. It summarizes the key details of your coverage. It can serve as proof of coverage at closing, satisfy periodic requests for proof of insurance, or provide evidence of ongoing coverage when changing insurers.
In many cases, home insurance binders are unnecessary, as insurers usually issue formal policies (and declaration pages) quickly, but if you do need one, contact your insurer.