What is an auto insurance binder letter? [Expert Review]

Most states allow auto insurance companies to take 30-60 days to complete underwriting your policy. In the meantime, an auto insurance binder letter is temporary proof of insurance that allows you to drive legally until the policy is ready. Learn more about auto insurance binder letters below.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Feature Writer Rachel Bodine

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: Apr 29, 2022

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Things to remember...

  • A binder letter is one of the first steps towards managing an auto insurance policy
  • When you apply for an auto insurance policy, the formal policy isn’t issued right away
  • The application must be underwritten and fully reviewed before it can be issued
  • A quote is an estimate – your rates aren’t guaranteed until after the policy has been fully underwritten
  • As long as you make a payment with your application, the insurer will give you a temporary binder letter

What is a binder for auto insurance? Most auto insurance consumers don’t understand what goes on after they submit an application. When you go to an auto insurance agent’s office and buy same-day cheap auto insurance coverage, it’s easy to assume the process is straightforward.

However, there is actually a lot of work that happens behind the scenes.

Once you apply, the insurance company initiates a process to assess the risk of each driver. During this process, the insurance company gives applicants a temporary binder letter, so that you are not without any form of protection. What is an auto insurance binder letter?

It’s temporary evidence of insurance that covers your driving while you’re waiting for the underwriting process before your formal insurance policy is active. An insurance binder may also be called an insurance policy binder, title binder, interim binder, insurance card, or certificate of insurance. Even though the binder is only an interim certificate of insurance, it is a fully enforceable contract of insurance.

To compare cheap auto insurance quotes and a binder to use now, simply enter your ZIP code above using our free tool.

What is an Auto Insurance Binder Form?

What is an insurance binder for a car? You should never just take an insurance agent’s word for it when they inform you that you have coverage. You will need some sort of document that solidifies the fact that you’re covered in writing just in case you have to file a claim. This document is called a binder letter.

What is an automobile insurance binder? FindLaw notes that a binder letter for a car is a temporary contract that provides insurance coverage to you until the actual insurance policy is issued.

It is a document that proves you have temporary coverage for a stated period of time. It’s dangerous for an insurance carrier to issue your ID cards for the entire term before they’ve verified your information.

The letter is something that you carry in your car as proof of insurance until everything is issued and you get the official ID cards.

The binder must indicate the insurance company, the agent’s contact information, the type of coverage and coverage limits, the binder term, the insurance binder holder, the binder number, the asset or risk insured, the deductibles, and the insurance endorsements.

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What do guaranteed quotes mean?

A quote is nothing more than an estimate. So what does it mean when you get an auto insurance quote is “guaranteed” for a week or day. Many people mistake quotes for the final rate and are thrown off guard when their actual rates go up. It’s important to remember that quotes are nothing more than estimates that are subject to change.

This just means that if all the information provided is accurate, the rate you are quoted will remain the same as long as you act by a certain date.

It is important to be as accurate as you can when you fill out an application so that you can get a better idea of what your real rate may be.

If there are any errors in the rating information, the quote and the final rate will still be different, The Most common mistakes include not listing a speeding ticket or failing to mention accidents within the last few years.

You can see below that these rate increases vary in severity based on what kind of tarnish you have on your record.

Auto Insurance Rate Increase After Accident, DUI, or Speeding Ticket
Driving RecordClean recordWith 1 accidentWith 1 DUIWith 1 speeding violation
State Farm$2,821.18$3,396.01$3,636.80$3,186.01
American Family$2,693.61$3,722.75$4,330.24$3,025.74
Liberty Mutual$4,774.30$6,204.78$7,613.48$5,701.26
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These factors affect the risk class you’re placed, which may increase your rate.

What happens after you submit an application for auto insurance?

After you submit an application, the company sends your application to the company’s underwriting department. The application has officially been entered into the underwriting phase of getting insurance.

This time is often called the binding period.

During the underwriting period, the insurer is allowed to cancel your insurance for almost any reason. During this period, you are not allowed to enter into a contract with another insurer. The insurance company then assesses your potential as a driver and decides to offer you insurance.

If they find inaccurate information, your rates may go up. You may even lose your insurance if it seems you were purposefully hiding an accident or ticket.


What happens during the underwriting process?

In most states, licensed insurers have between 30 and 60 days to underwrite an auto insurance application after it’s been submitted. The company must make a decision by the end of this period. Once they make a decision, the company will send over the necessary documents.

If a policy isn’t issued right away, you don’t have to go without coverage in the interim. Most insurance companies provide you coverage while the policy application is being reviewed.

As long as you have asked the policy to take effect and you’ve made the first payments, coverage will be afforded.

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What can happen to your coverage after the underwriting process?

If something is found and your rates are going to change, the insurer can take one of a few different actions.

The first action would be to raise your rates to match the new risk class you fall into. If this happens, the carrier will bill you for the difference between what you’ve already paid and what you owe for the coverage that’s already been provided.

The company can also cancel the coverage if you don’t qualify for it. If the insurer decides to do this, you’ll get a notice giving you about 10 to 30 days to find new coverage elsewhere.

Carriers will only cancel policies if it’s found that you’ve lied on the application. Yale Law Journal explains this process called a policy rescission.

These documents make it possible for the carriers to give clients coverage right away. If you’re about to shop around for auto insurance and you need immediate coverage, don’t forget to print a binder.

Frequently Asked Questions: What is an auto insurance binder letter?

Do you have more questions about auto insurance binders? Well, we have more answers.

#1 – What does an insurance binder letter look like?

It’s just a form letter but should include most of what will end up being in your policy. An auto insurance binder example would include: 

  • Coverage limits
  • Your car’s information
  • Insurance name, contact information, and policy number
  • What your deductibles will be

Basically, it should include any details that will be important in case you get into an accident during the time between receiving the letter and getting your completed policy documents.

#2 – How long does it take to get an insurance binder?

Since the insurance binder is the temporary placeholder while your policy is being completed, it shouldn’t take very long for you to get one. In fact, you’ll probably be able to get it within a few hours. However, you should always request an insurance binder as proof of insurance prior to getting the formal policy.

#3 – Is an insurance binder the same as a declarations page?

No, it is just temporary proof of coverage while your policy is being drafted by an underwriter.

Your declarations page may look similar, but it’s the actual policy’s summary page. When the policy is underwritten when you’ll receive the declarations page.

#4 – What is a 30-day binder?

A 30-day binder is just another term used for a binder, meaning it is valid for up to 30 days.

Are you looking for ways to save money on your auto insurance? You can get free online auto insurance quotes right now and the best coverage for your temporary binder by entering your ZIP code in our comparison tool below.

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