Understanding an Insurance Binder
Insurance policies are effective at 12:01am on a stated date and then expire at 12:00am typically 6 or 12 months later. Having a standard time of day that policies begin, and end, greatly reduces confusion for consumers.
But clearly, few people just happen to purchase insurance at precisely midnight; as a result, an agent will often “Bind coverage” to span the gap between the time of day when the payment was made and the actual effective time and date. Sometimes car dealerships will provide a “Term Policy” allowing one to drive home a car they purchased while waiting for the buyer to contact their insurance agent. These Binders provide temporary authorization of coverage issued prior to the actual insurance policy.
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