Home Insurance Articles
Understanding The Functions Of A Home Insurance Binder
2010-08-15
Home insurance binder is one of those insurance terms that isn't clearly realized until the need to get one becomes apparent. There are different functions of a home insurance binder that need to be understood to maximize protection and lessen risk. To perceive what a home insurance binder is, like all insurance terms, it is vital to know the real life benefits and shortcomings in practical life situations.
Basically, a home insurance binder is proof in writing that insurance is temporarily in effect until a specified expiration date, until a permanent policy can be obtained. It takes time to receive a permanent policy because insurance companies often require an inspection to the premises or other prerequisites to be fulfilled before issuing a permanent policy. Time is of essence in certain situations, like closing on the purchase of a home, where insurance coverage of property is required before a bank will issue a mortgage. A home insurance binder is useful then, because it will satisfy the requirements of a loaner and provide temporary protection of assets for the purchaser.
In insurance terms, a home insurance binder is essential to initial coverage but there are possible shortcomings to be aware of. There have been times when people have been issued a home insurance binder, actually suffer a loss before having a permanent policy issued, and then have their insurance canceled, denied or lowered. This is a tragedy that can be avoided simply by asking the insurance company agent if a disaster occurs during the home insurance binder period prior to receiving a permanent policy, will the insurance company provide coverage? Every state regulates the procedures of insurance companies issuing a home insurance binder, and insurance companies must follow protocol of the state they are licensed in. Insurance regulations are public information, as well as records of insurance company complaints and compliance history. It is vital to be armed with this knowledge when choosing insurance companies.
The functions of a home insurance binder are fundamentally designed to provide all the security needed to protect the interests of a purchaser and the lien holder in case of an unforeseen disaster happening before a permanent policy can be issued. The coverage guaranteed would be minimal, so by no means should the amount the property is insured for temporarily should have little bearing on the permanent policy. In insurance terms, risk management is what insurance companies are looking toward when issuing a home insurance binder, so the protection issued during a temporary period will be minimized to protect the interests of the insurance company. Functioning correctly, a home insurance binder protects the interests of all parties involved.