Insurance binders explained

When you take out a mortgage to purchase a home, you’ll need to provide evidence of a homeowners insurance policy. It’s quite possible, however, your insurance policy won’t be available until after the title is transferred to you. Despite not having your homeowners policy in hand, your lender will still require proof of coverage before closing. This is where an insurance binder comes in.

What is an insurance binder?

An insurance binder is a temporary document that insurance companies provide to lenders on your behalf, before your policy document is available. It serves as evidence that you have homeowners insurance in place and that you’re fully covered in the meantime.

What does an insurance binder contain?

The insurance binder will contain the same major details that your official policy will eventually cover, such as the type of coverage provided and all relevant dates. Typical details include:

• Name of the insured(s)
• Location of the insured property
• Your lender
• Liability coverage
• Property coverage
• Premium
• Binder Term
• Deductibles

Eventually, the binder will expire and you’ll receive your official policy, which will include the insurance declaration page. Your insurance declaration page is typically the first few pages of your insurance policy, and, like the insurance binder, includes a breakdown of your policy’s key details.

When do you get a homeowners insurance binder?

You will need a homeowners insurance binder if you’re buying a house with a mortgage, refinancing an existing mortgage or getting a policy renewal.

• Buying a house: If you’re taking out a mortgage, your lender will normally request a homeowners insurance binder. Homeowners insurance is required so both yours and the lender’s investment is protected from losses or damage.
• Getting a policy renewal: Whether your insurance policy has expired or you’re making amendments to your current policy, you may need to provide an insurance binder to your lender so they have a record of the coverage renewal.
• Refinancing a home: If you’re refinancing a home, you’re technically taking out a new mortgage. To ensure your property is still protected, it’s common for the lender to request evidence of insurance.

As mentioned, if you’re taking out a mortgage to buy a house, an insurance binder is typically necessary because your policy may not be active yet, and you likely don’t have a copy of your official policy. Proof of payment of the premium that has been received by the insurance company will also be required before closing, to prove the policy is in force.

How do I get an insurance binder?

You can request an insurance binder from your insurance broker. They’ll typically provide the document once they receive payment. Your insurance broker will usually either mail a physical copy or email the binder to your lender and to you, the insured. It’s best practice to keep a copy of your insurance binder on hand.

In summary

An insurance binder is a document provided to your lender by your insurer when you’re taking out a mortgage, refinancing or updating your policy. It provides evidence that your home is properly insured, including key details of your coverage.