Understanding the terms of your auto insurance coverage is crucial. Otherwise, you might end up driving with less coverage than you’d thought, or you might even end up on the road without an active auto insurance policy. This happens to many policyholders because they don’t familiarize themselves with the details of their insurance coverage. One part of most car insurance policies that’s often neglected by motorists is the auto insurance binder. Many drivers aren’t even aware of what a binder is, much less how it works. It’s certainly a term you want to know when you’re shopping around for an auto insurance quote because it pertains to when your new insurance becomes active, and when your policy becomes officially legal.
The selling insurance company issues an auto insurance binder when a driver first purchases the auto insurance policy. The binder provides temporary proof of insurance. You should be able to find the active dates of the binder listed on the card. (If you buy your insurance online, you might print the binder, in which case it’s listed somewhere on the page that you print off). An auto insurance binder is issued while underwriting is completed for your insurance policy. Basically, the binder provides proof that you legally have auto insurance coverage, but indicates that your policy isn’t completely purchased or active
yet. After the underwriting process is complete, an official insurance card will replace the binder. Depending on the state that you live in, the length of an auto insurance binder might vary. It may be helpful to research your own state’s laws to ensure that your insurance is valid before you hit the road.
It’s a bit complicated, as you might have noticed. But all a policyholder needs to know is that their policy is active and legal as long as they keep the auto insurance binder with them, and replace the binder with proof of insurance cards as soon as they can. If you get into an accident in your newly-insured car while you’ve got a binder, you can still make a claim on your new insurance policy, and you still have all of the coverage that you paid for when you purchased your new plan.
Remember, it’s always a good idea to familiarize yourself with your insurance policy. If there are any terms that you don’t understand, contact your insurance agent immediately, and when looking for an auto insurance quote, inspect all parts of prospective policies. If you get into an accident, it will be very helpful to know how your auto insurance coverage works, and you’ll save yourself a lot of hassle when submitting a claim.