What Is A Car Insurance Binder?

Key Points:

• A car insurance binder provides same-day coverage and shows your policy coverage types and limits.
• You can get a binder by email to satisfy lender and dealer requirements when purchasing a new car.
• Premiums can change once the underwriting process is completed.

If you want to buy a new car, the dealer will ask for proof of insurance before you can drive it off the lot. You can get same-day coverage from most major companies, and they’ll email or fax an insurance binder to provide proof.

In this guide, we’ll talk about what a car insurance binder is and what it’s used for. If you need coverage fast, we recommend checking out our picks for the best car insurance providers and comparing a couple of rates.

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What Is A Car Insurance Binder?

An auto insurance binder is a legal document issued by your insurance company that provides temporary proof of insurance coverage. The auto insurance binder letter allows you to drive legally while the insurance provider verifies your data and prepares your official car insurance policy document. It’s most commonly used as proof of insurance when you buy a new car.

What Does A Car Insurance Binder Include?

An auto insurance binder typically details some of the following things regarding your policy:

• Vehicle details: Make, model, year, and vehicle identification number (VIN)
• Liability, comprehensive, and collision insurance coverage limits: Indicates the type of coverage and policy limits that are being offered to the owner of the insurance policy
• Name of policy owner and insurance company: Mentions the name of the insured individual and their insurance company
• Deductible: Details the required deductible for claims
• Insurance agent: Includes the contact information of the insurance agent who authorized the binder
• Policy restrictions and exclusions: For example, whether your policy will be accepted in foreign countries

An insurance binder for a car typically expires after 30 to 90 days, so it’s important to make sure you’ve obtained your formal policy document before then. The official policy will usually arrive before the auto insurance binder expires, but it never hurts to call your insurance company and ask when you will receive your official document.

Once your car insurance binder expires, be aware that you are technically not covered with auto insurance until your formal policy document and insurance card have been issued.

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When Do You Need An Auto Insurance Binder?

When you purchase an auto insurance policy, you should always request an insurance binder form to have evidence of insurance before a formal document is issued. It’s handy to have an insurance binder on hand in case you are pulled over by the police or have an accident.

If you are financing your car, you will need an insurance binder to show your lender that you have obtained the amount of insurance required before the lender can approve your loan. 

You’ll also need a binder to show the dealership proof of insurance even if you’re paying for the car in cash. A dealer won’t let you drive off the lot without insurance.

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Is A Future Policy Guaranteed Once I Receive My Insurance Binder?

An insurance binder shows you’re covered up to your policy limits while the underwriting process takes place. When you buy a new policy, you provide the insurance company with information on yourself and your driving history. The company has to verify that information and assign the appropriate risk level during underwriting. This can take a few days to a few weeks depending on the company and its capabilities.

Unfortunately, an official policy is not guaranteed once you receive your insurance binder. When you receive your insurance binder, your prospective auto insurance company is also examining several things about you. These include:

• Your driving history
• Your credit score
• The type of vehicle you drive
• How long you’ve been driving

It’s possible that you left things out of your driving history either because you forgot or you didn’t want the company to know. Underwriters will look into documentation with the DMV to see if everything checks out. If not, you could see your premium rise after the process is complete. This is one reason why a binder is temporary.

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What Should You Do When Your Insurance Binder Expires?

When your auto insurance binder reaches its expiration date, you should call your car insurance company to make sure that your formal policy has been issued. Upon expiration, you lose insurance coverage, so it is essential to know that your formal policy is on its way before your binder expires.

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Car Insurance Binder: Our Take

To summarize, a car insurance binder is a temporary coverage document you can use to purchase a new car or provide proof of insurance before your full-policy documents arrive. It lasts between 30 and 90 days to provide coverage during the underwriting process.

Our Recommended Car Insurance Providers

Whenever you shop for car insurance, you should get quotes from multiple insurance agencies so you can compare rates. If you have not decided on a particular insurance company, we recommend Progressive and Geico, two of the best car insurance companies in the country.

Progressive: Best For Usage-Based Insurance

With thousands of customer reviews and a Superior A+ rating from AM Best, Progressive is one of the most reputable insurance providers in the United States.

Progressive sells standard coverages like comprehensive coverage, collision, and liability car insurance. In addition, you can get benefits such as roadside assistance, its usage-based insurance program, and rideshare coverage with your Progressive car insurance. 

For more, read our Progressive auto insurance review.

Geico: Best For Basic Coverage

Geico was named best overall in our industry review and is especially good for students and those seeking affordable insurance. Geico offers numerous discounts for car insurance, such as 25 percent off for multiple vehicles on a policy.

The insurer has an A- rating on the Better Business Bureau (BBB) page and an AM Best financial strength rating of A++. Considering it offers 16 discounts for a variety of situations, Geico is a strong contender for most drivers. 

For more, read our Geico auto insurance review.

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Car Insurance Binder: FAQ

Below are a few frequently asked questions about car insurance binders.

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How We Rate Auto Insurers

Our review team extensively researches auto insurance providers to deliver informed and unbiased assessments of leading companies. We evaluate several key rating factors that are important to consumers to determine which providers are the best in the industry:

• Reliability: It’s important that an auto insurer is able to meet its claims obligations. Companies with a strong financial strength rating from AM Best score best in this category. Established insurers with a long history of reliable service also receive positive marks.
• Availability: Insurance companies that offer wider availability to consumers in terms of state availability and few eligibility requirements are more likely to meet consumer needs.
• Coverage: To determine our coverage score, we look at the number of coverage options available as well as coverage limits and deductible options. Our ratings also take into account additional services and benefits like roadside assistance.
• Pricing: Cost can be difficult to compare between insurers because so many factors impact annual premiums. The cheapest insurer for one driver may not be the cheapest for another. To determine our cost score, we look at insurance rate estimates generated by Quadrant Information Services, discount opportunities, and consumer reports.
• Service: We comb through customer reviews on sites like the Better Business Bureau (BBB) to learn about customer experiences. Insurers with a low volume of complaints score well in this area. We also consider the claims process, giving higher ratings to car insurance providers that offer a smooth experience.
• Technology: Providers with an online quote tool, easy-to-use claims app and a usage-based insurance app score best in this category.

*Data accurate at time of publication.

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