What is an Insurance Binder?
Have you recently bought your first home? If so, you know how time-consuming and challenging the task can feel. You need to save, search and negotiate before you can even think about moving into your dream starter home.
However, before anything is set in stone, you need to take a moment to think about home insurance. Owning high-quality home insurance guarantees that you'll receive financial coverage if your new home sustains damage from something out of your control.
But, what happens if something happens to your recently purchased home but you don't have a copy of your insurance policy yet? This is precisely when an insurance binder comes into play — if you're not familiar with insurance binders or need a quick refresher on why they're important, you can find the information you're looking for in the following paragraphs.
What is an insurance binder?
An insurance binder is essentially a temporary contract that proves that your home insurance provider has agreed to insure your property.
If you need to provide proof of insurance before receiving your finalized policy, you can utilize your insurance binder letter.
How and where do you get an insurance binder?
The only way to get an insurance binder is through your home insurance provider. Your home insurance provider will supply you with a binder after you've paid your premium for the first time.
Many insurance providers can supply homeowners with a binder within 24 to 48 hours. However, some companies are able to finalize a binder in less than a day.
Having a hard time finding cheap home insurance in Canada?
If you're struggling to find affordable home insurance quotes in Canada, you should reach out to an experienced insurance advisor online.
Insurance advisors can supply you with a long list of quotes in a few short minutes! This means that you can browse through the best (and most affordable) policies from the most respected providers in the country until you've found the perfect match.
What types of homeowners should get an insurance binder in Canada?
There's no denying that binder insurance is an excellent choice for homeowners that want to be proactive and precautious. In all honesty, it’s never the wrong time to start protecting your property and personal belongings.
However, we should note that certain types of homeowners may need an insurance binder more than others.
Homeowners with a mortgage lender
Unless you purchased your home outright, you likely had to find a mortgage lender for your significant investment. In Canada, mortgage lenders require homeowners to provide proof of insurance before committing to issuing a loan.
Although, as you may know, writing an insurance policy is an arduous task that requires a fair bit of time. Because of this process, it can often take insurance companies weeks or months to finalize a policy.
If your mortgage lender is breathing down your neck and you still haven't received the final copy of your home insurance policy, you can utilize your home insurance binder.
As mentioned above, a binder acts as temporary proof of home insurance. This means that you can give your mortgage lender a copy of your binder instead of waiting for your insurance policy to arrive.
Homeowners that need to submit a claim before their policy arrives
Unfortunately, many things in life are out of our control. We can't control animals, the weather or the actions of others. Furthermore, we never know when something life-changing might occur.
This is why many Canadian homeowners feel that having high-quality home insurance is essential.
However, have you ever wondered what would happen if something damaged your home before you’ve received your insurance policy from your provider? You're not alone — many prospective homeowners ask us this all of the time.
Thankfully, we think you'll like the answer. If your home gets damaged by a covered risk or peril before you’ve received your finalized policy, you can use your insurance binder. Your insurance provider will hold their end of the agreement and provide you with the necessary financial coverage for the repairs.
Here's a simple example:
Imagine that you recently bought your first home. A few days after moving in, you hear that a hailstorm is moving through your neighbourhood. The following morning, you notice that your roof has sustained thousands of dollars worth of damage.
You know that your home insurance policy covers hail-related damage, but you're not sure if you're eligible for coverage because you haven't received your policy.
Instead of bearing the cost of the repairs by yourself, you can use your insurance binder to submit a claim. After completing an assessment, your insurance provider will reimburse you based on the severity of the damage.
FAQs about insurance binders in Canada
Here are some of the most commonly asked questions that we receive about insurance binders:
How much does a binder of insurance cost in Canada?
Technically, binders are free of charge. Once you've paid your premium, your provider will supply you with a binder.
Will my insurance binder expire?
Yes, all insurance binders have an expiration date. Generally, most binders are only valid for 30 to 60 days. If you're not sure how long your binder will last, don't hesitate to reach out to your insurance provider.
What information is in a binder?
Generally, binders feature the following information:
- Type of policy
- Level of coverage
- Named risks and perils
- Length of policy
- General information about the insurance provider
What's the difference between a binder and a declaration page?
Binders and declaration pages are similar in the sense that they can be used as proof of insurance and list the type of coverage that the homeowner has. However, binders are issued before receiving the final policy, whereas declaration pages are provided afterwards.
Remember to utilize your insurance binder
As you now know, insurance binders are valuable tools that allow new home buyers to protect themselves from risks and perils before obtaining their finalized policy.
If you still have questions about binders, you can contact your insurance provider at any time. Your insurance provider can answer all of the questions you have about the nuanced topic.