Binders

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PostPosted: Wed Jul 28, 2010 3:06 pm   Post subject: Binders  

Are agents required to provide an insurance binder to me once I purchase a package policy? I only received a certificate of liability insurance showing my coverages and the certificate holder states "for information purposes only."


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Lynette
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PostPosted: Wed Jul 28, 2010 11:12 pm   Post subject:   

Binders are not required to be issued. Some agents do not have authority to issue a binder for coverage. A certificate of liability insurance is proof that a policy exists, but is not necessarily a guarantee of coverage. "For informational purposes only" simply indicates it is not the actual policy.



The only real value of a binder is the guarantee of coverage from the time it is issued until the risk is declined or the policy is issued. If that's what you need, then you must ask the agent if you'll receive a binder as soon as you write the check for the premium.



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MaxHerr
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PostPosted: Thu Jul 29, 2010 12:20 pm   Post subject:   

Quote:
A certificate of liability insurance is proof that a policy exists, but is not necessarily a guarantee of coverage.


Well, that seems a bit tricky, but it shouldn't be a problem if the carrier holds a good record.

Quote:
If that's what you need, then you must ask the agent if you'll receive a binder as soon as you write the check for the premium.


Who'll give such a guarantee of coverage if the agent fails to issue a binder?

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anonymous00
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PostPosted: Thu Jul 29, 2010 4:58 pm   Post subject:   

Quote:
Well, that seems a bit tricky




Not really, if you understand how insurance works. I can copy my policy's declaration page and give that to anyone as "proof" that I have insurance. Or I can contact my agent and ask for a "certificate of coverage", and they can supply that. Either way, it does not "guarantee" that I have coverage because I can cancel my policy before a claim arises.



A binder is, as stated, a guarantee of coverage until the risk is declined or the policy is issued (in which case the policy -- the full contract with all terms, conditions, exclusions -- merely replaces the binder). Only agents/brokers with binding authority can issue a binder.



Truly, only the insurance company can "guarantee the coverage" -- and they can do that orally or in writing.



But, in recent years, we've seen more frequent examples in health insurance, where the insurer has authorized (i.e., guaranteed payment to) a physician or hospital to provide medical care to an insured, only to later revoke that authorization and fail to pay the provider on the basis of something known as "postclaims underwriting". That causes real problems for real people. That's why the practice is prohibited by law. But as we all know, laws don't prevent violations, they just define them.



Agents/brokers sometime "act" as though they have that same sort of authority when, in fact, they do not. It should be obvious that when that occurs it is a real problem for the insured, and can be a problem for the insurer. It's called "apparent authority" and it's what gets people in trouble.



The value of a binder is that it is often the document a person needs to close escrow on a home, secure funding for a business start up, or execute a lease on commercial property. It also makes it legal for a person to drive their automobile on the public highways, even though their policy has not been issued.



The only way to know for sure that insurance is in force today is to contact the insurer today and ask. The answer tomorrow could be different.


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