Even though it’s called a binder, it's only a temporary insurance contract for your vehicle – and it's usually only a few pages of paperwork, not an actual binder like the name suggests! It acts as the proof of insurance required to finance or purchase a car from a dealership and allows you to drive it on the road after you take delivery. A binder’s purpose is to fill in in case there is a reason why the actual policy can’t start right away, typically due to finishing up the underwriting process. That’s where an insurance binder can help. Most dealerships require that borrowers have proof of insurance before they drive off the lot – and lenders require that to be full coverage auto insurance. If you’re about to buy a car, but you haven’t chosen an official insurance policy, it could mean trouble. Here’s how it can help when you’re purchasing a vehicle. An insurance binder is a temporary insurance policy that allows you to drive a recently purchased vehicle until your actual coverage starts.
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