If you’ve been told that you need a home insurance binder, you might have a few questions. First of all, why do you need an insurance binder? How do you get one from your insurance provider? And most importantly, what is a home insurance binder?
A home insurance binder is not a folder where you keep your insurance paperwork – although that might be useful, too! In this case, “binder” refers to binding, as in a binding contract. The insurance binder shows that you’ve purchased insurance coverage. It can come in handy, especially if you’re trying to close on a mortgage loan; so it’s smart to request one when you purchase insurance.
What is a home insurance binder? What’s included?
A home insurance binder is a simple document that provides proof of your insurance coverage. It should include key information about the insurance policy you just purchased.
This information typically includes the following:
- The address of the house being insured.
- The insured. This is typically the homeowner or homeowners.
- The loss payee. This is often the mortgage lender.
- The insurance company providing coverage.
- The type of coverage and covered perils.
- The coverage limits. This includes separate limits for various coverage types.
- The deductible. There may be separate deductibles for different coverage types.
- The coverage period. This includes the start date of coverage and the end date.
How is a home insurance binder different from a declarations page?
At this point, you might be thinking that the home insurance binder sounds a lot like an insurance declaration page. Insurance binders and insurance declaration pages are similar in content, but they serve a different purpose.
The declarations page is included with the home insurance documents to provide a summary. The home insurance binder is provided before the complete home insurance documents to provide temporary proof of coverage. Therefore, even though the information contained is very similar, they are not exactly interchangeable. You will receive the insurance binder before you receive the declarations page.
Why do you need a homeowners insurance binder?
A home insurance binder is important because it provides temporary proof that you’ve purchased insurance coverage.
According to the U.S. Census Bureau, 61.7 percent of owner-occupied homes have a mortgage. Mortgage lenders typically require borrowers to maintain home insurance coverage with sufficient coverage limits. You may need to provide proof of insurance before you can close on the loan, and you may need to show that the mortgage lender has been listed as loss payee.
It can take a while before you receive the final policy documents, and you won’t want to wait that long to get the paperwork for the loan to be settled. The home insurance binder solves this problem by providing proof of insurance quickly.
Meeting the mortgage lender requirements is often the main reason to get a home insurance binder, but even if you don’t have a mortgage on your house, it’s smart to request a binder. The binder provides confirmation of coverage, and that can provide you with peace of mind. After all, you want to make sure your home is fully protected and that there have been no miscommunications or mistakes regarding coverage. The home insurance binder lets you do that.
After You Get Your Home Insurance Binder from the Insurance Company
Review your home insurance binder as soon as you get it.
Although all of the information should be correct at this point, you don’t just want to assume that it is. Go ahead and doublecheck that everything is in order.
- Is the home address correct?
- Is your name listed correctly? If you have a spouse or other person who should also be listed as an insured, is that name also listed correctly?
- Is the correct mortgage lender listed as a loss payee?
- Are the types of coverage and covered perils what you expected?
- Are the coverage limits what you expected?
- Is the deductible what you agreed to?
- Are the start and expiration dates accurate?
If you see anything wrong, even if it’s just a small typo, contact the insurance company and get the information corrected immediately. Also, if anything on the binder surprises or confuses you, talk to your insurance agent about your concerns. These are important matters, and you should get everything straightened out as soon as possible. You don’t want to wait until you have a claim to start worrying about the details of your insurance.
Once you have the binder and you’ve verified that everything is correct, you can contact your mortgage lender about closing on the loan. If you have already closed on the loan – for example, if you’ve switched insurance companies for coverage on a house you bought a while ago – make sure your mortgage lender has proof of your new insurance coverage.
Do you still need the home insurance policy documents?
The home insurance binder is only meant to serve an immediate, temporary purpose. As such, it should expire after a short period of time, often around a month or maybe two. Additionally, the binder does not include all of the details that will be contained in your complete homeowners insurance policy documents. Therefore, it’s still important that you receive your policy documents.
Talk to your insurer to find out when you should receive your final documents. If you don’t receive them when expected, and certainly if you haven’t received the final documents before your binder expires, reach out again to see what went wrong and to get replacement papers if necessary.
Answering Your Homeowners Insurance Coverage Questions
As a homeowner and policyholder, you likely have a lot of questions. The good news is that you don’t have to navigate insurance issues on your own. At Higginbotham, our personal insurance specialists can help you get the right home insurance coverage, as well as any auto, umbrella or other policies you need. Learn more.