Refrain from heading to the nearest school and office supplies store if, while buying your dream house, the mortgage lender asks you to present an insurance binder. It is not a ring binder containing a certificate of insurance or any other document proving that you have coverage. It is an entirely different thing.
You can get your hands on a homeowner’s insurance binder by getting in touch with either your trusted insurance company or agent.
There are many things to take care of when buying a house. Making the process even more stressful is hearing all sorts of insurance jargon, such as an insurance binder, coming from the mortgage lender. Do not worry because, by the time you reach the end of this article, you will have a better idea of what a binder is.
What is it
An insurance binder is not where you place a copy of your policy from the insurance company. Rather, it is a piece of paper stating that you have coverage. The validity of a binder lasts anywhere from 30 to 90 days, meaning it is temporary.
Your insurance binder’s purpose is to prove that you have coverage even before you get the finalized contract from your chosen insurance company. Binders are commonly for homebuyers who refuse to get coverage before they are 100% sure that they want to get a new house. Having one is proof that you agree to your home insurance policy.
It is completely up to you to decide if you would like to place your insurance binder in a ring binder, folder, or an envelope. No matter the case, it is important that you follow up with your insurance company or insurance agent for the issuance of your formal contract.
Purpose of Home Insurance Binder
Like the actual policy documentation, your insurance binder describes your coverage and the terms of your policy. A mortgage lender can find on the binder everything that he or she needs to know about your insurance. By the way, it is also the one that you will have to give to the mortgage lender if you wish to switch home insurance companies.
The mortgage lender is not the only one who can benefit from checking out your insurance binder. You can also benefit from having it because you can make sure that you get the type of coverage that the insurance company or insurance agent promised.
However, you may not come across all the specifics. Again, a homeowner’s insurance binder is a temporary document only. Further, it usually consists of a single page, which means that it is more of a general overview of your policy. The good news is that your binder can let you know if there are inaccuracies so that you may bring them up right away.
What to do before Binder’s Expiry
As mentioned above, your insurance binder is valid only for 30 to 90 days. In some instances, the expiry may be shorter. No matter the case, it is important to get your hands on the finalized contract. Not only does it provide a more detailed description of your coverage and the terms of your policy, but it also serves as a permanent copy.
Your insurance company or insurance agent knows the importance of issuing the actual documentation. It means that they will take every step necessary before your insurance binder goes past its expiration date.
Consider getting in touch with the insurance company or insurance agent if you haven’t received the finalized contract a couple of weeks before the binder’s expiry. It is better to be sure than to lose coverage. Without the actual documentation, you may be at risk of financial loss as well as higher monthly or annual premiums.