What Is an Insurance Binder?


An insurance binder is an insurance policy that’s valid until your complete policy is approved. It permits you to show proof of insurance coverage.

Find out more about binders, and when you might require one.

What Is an Insurance Binder?

The insurance binder An insurance binder is a temporary insurance policy. It’s typically replaced with the policy within thirty to ninety days and disintegrates when the policy has been issued. A typical binder is only a couple of pages of information, yet it’s an insurance contract that’s valid. It contains all of the clauses and limitations of the policy, which include limitations, conditions, exclusions, and endorsements.

How an Insurance Binder Works

A binder is created if a person who is a policyholder requires proof that insurance protection is in place. For instance, suppose an owner of a landscaping firm recently bought a new truck and insurance on the vehicle with a brand newly issued commercial auto insurance policy. The policy hasn’t been approved until now, which means the owner must have a binder to file the truck’s registration with the motor vehicle department of the state. The binder acts as proof that the vehicle is insured for the liability of commercial vehicles.

Binders are also utilized to prove the existence of insurance on the property. Businesses often purchase commercial properties by borrowing money from a bank and using the property as collateral for the loan. The lender typically will require the buyer to protect the building from physical damages through the purchase of commercial property insurance.

Usually, the lender won’t make the loan final until the buyer can prove insurance coverage. If the insurance policy hasn’t been issued yet, the borrower may show the lender the binder. Some states have lenders who require binders as proof of insurance coverage even if the policy isn’t in existence.

A binder isn’t the same as the certification of insurance. The certificate is typically issued following the time the policy is issued. It’s not a way to provide evidence of insurance however, it’s not an actual insurance policy and does not (by itself) offer any coverage. It’s merely an overview of the coverages and limitations that are included within the insurance policy.

Binders are issued by an insurance firm or an agent for insurance on behalf of the insurer. Agents can issue binders if the insurer has given them an authority that is binding (authority to start the insurance policy). Insurance brokers don’t have binding authority since they aren’t representatives for insurers. An insurance broker may distribute an index card, however, the document will not be legally valid until it is authorized by an underwriter or any other official representative from the insurer.

What Does an Insurance Binder Cover?

Most insurers have binders that are based using a standard form that is published by ACORD a non-profit organization that is owned by insurers. Certain insurers have designed specific binder templates. Whatever the format that is used, a binder generally has the following details:

General Information

A binder contains general information regarding your business as well as your insurance company and your agent. This includes:

  • The name of your agent, the email address, and other contact details
  • The name of your company and the address
  • Name of your insurance company
  • Binder number
  • Binder effective dates
  • Policy number
  • Description of the insured operation such as vehicles, property, or operations

Binder numbers are a sequence of numbers (often coupled with letters) that are used to identify you. It’s not anthe the same as your policy’s number. The binder will display an insurance policy number only when the binder was given to extend the validity of a policy that’s expired.


Let’s say, for instance, that you have purchased workers’ compensation insurance. Sixty days before the date your policy is due to expire you receive a notice from your insurance company stating that it will stop writing workers’ compensation policies in your state after six months. You will need to wait for at least 60 days before you can find another insurance provider, and your insurer sends you an extension binder for another 60 days. You have now got 120 days to secure insurance from another company.

Coverage Information

A binder is usually divided into sections that are each specific to a particular type of insurance. For every coverage you’ve purchased, your binder will contain the limit of coverage and the forms for coverage that will be provided as well as the key endorsements that will be affixed to the policy. If your insurance protects a vehicle or a building that is secured with a loan the name of your lender should be included in the binder.


In general, an insurance company can remove your binder from its inventory if it decides that your company doesn’t meet its underwriting requirements. If an insurer decides to cancel your binder, they must give you fair notice. Since binders are used as an alternative to policies and policies, they have the same notice requirements which apply to policy cancelations. The rules vary between states. Fortunately, very few binders can be canceled since the majority are replaced by insurance policies.

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