What Is a Homeowners’ Insurance Binder?
During the process of buying a new home, you’ve likely been introduced to a variety of new confusing terms and documents. When it’s time to apply for a mortgage loan, you’ll likely need to have a homeowners’ insurance binder. If you’ve never heard of this document, you’re not alone. Here’s everything you need to know about getting a homeowners’ insurance binder to be prepared for your mortgage application.
What is a Homeowners’ Insurance Binder?
A homeowners’ insurance binder is a document between you and your insurance agent that proves you have purchased homeowners’ insurance. When you buy a home, your lender will require proof of insurance. An insurance agent will write the details of your policy in an insurance binder to serve as a temporary insurance policy until the official policy is finalized. Your homeowners’ insurance binder is valid until you receive your official contract.
Your insurance binder contains important policy details like coverage limits and deductible amounts. This temporary document outlines the details of your insurance plan and should be provided automatically by your insurance agent. While some details vary, this homeowners’ insurance binder sample can give you an idea of what a typical insurance binder looks like.
Who Needs a Homeowners’ Insurance Binder?
Purchasing homeowners’ insurance is an important and necessary part of the home buying process. Homeowners’ insurance gives you protection for potential damages or losses to your residence and possessions. The insurance is traditionally required by mortgage lenders. It’s also an important investment to protect your valuable home. When you purchase a new insurance policy, it can take a few days to process paperwork and underwrite the policy. Your insurance binder provides temporary proof of insurance until the official policy is complete. A homebuyer who needs immediate proof of insurance needs an insurance binder. A homeowners’ insurance policy may also be needed in the event you’re refinancing an existing home loan.
Since your insurance binder is a confirmation of coverage you’ve obtained for your home, it’s important to examine the document and make sure all the details are correct. These details are an important part of your mortgage application and will be vital if, for any reason, you need to make a claim. Correcting any inaccuracies will prevent errors in the policy.
Information Included in Your Insurance Binder
Your insurance binder will include all of the information your mortgage lender needs to understand your insurance coverage. When you receive the document, read it thoroughly to ensure it contains the following details.
In an insurance policy, the risk describes what is insured. In a homeowners’ insurance policy, the risk is the property and the dwelling. Information in your binder will include the address, the amount of insurance on the dwelling (or value of the property), and any possessions covered in the policy. Additional information about the type of home and details about the property may be included.
Identity of Insured
The owner of the property, also called the policyholder or the named insured, should be clearly listed on the document. If the property is in more than one name, additional owners, such as your spouse, are also listed. The binder will also list the lienholder or mortgage lender.
The insurance binder will list the amount of liability coverage on those identified as insured on the policy.
Each section of insurance on the home will have a deductible that must be met. Each section will be listed with the type and amount of coverage and the deductible amount. If the policy contains any insurance endorsements, they will also be listed.
Insurance Agency and Type of Coverage
The name of the insurance company providing coverage is listed in the document. Since there are many levels of coverage available for homes, the insurance type must be listed to avoid errors.
The insurance term describes the time between the date the policy was purchased and the date it becomes ineffective. Since an insurance binder is temporary, the ineffective date occurs when the official policy becomes active (usually within 30 days). It’s important that you receive your official policy documents before the date your binder expires to avoid a lapse in coverage.
Identity of Insurance Agent
The name of the insurance agent who authorized the binder will be listed on the document. There may also be a disclaimer stating that the binder is subject to the terms and conditions in the official policy.
Terms of Insurance
The purpose of a homeowners’ insurance binder is to provide temporary insurance coverage until the policy is underwritten. Therefore, the terms of your policy, or an outline that explains your coverage details, is the main information supplied by your binder. The terms in your finalized policy will likely be the same as what’s in the binder. However, minor changes sometimes occur like changes in your rates.
A homeowners’ insurance binder is one of many important documents you need during the process of buying or refinancing a home. This document is easy to get from your insurance provider and is a great way to learn about the homeowners’ insurance you need to protect your home.
At LoPriore Insurance, we understand the importance of gathering the documents you need in a timely manner to complete your home purchase. An experienced insurance agent can help you determine your coverage needs and provide you with an insurance binder with the details of your new policy. The LoPriore motto is insurance that fits your lifestyle. We are a one-stop-shop for all of the various types of insurance to fit your changing lifestyle. Our independent insurance agents act as advisors to help our valued customers find the insurance coverage they need at the best prices available. Get in touch today to learn more about the policies we provide, get an instant quote, or get the homeowners’ insurance binder you need to complete the purchase of your new home.