A Binder is like a temporary contract of insurance for a short period until the policy is issued and the insured gets the certificate of insurance. As per the definition of IRMI (International Risk Management Institute), Binder is a legal document that is issued by either an insurer or an agent. Binder served as evidence of insurance until a policy gets issued. Binder is valid only for a limited time mostly 30 to 90 days. A binder must definite your agent’s name, address, and contact information, the amount of insurance, type of policy, and coverage, and must define the insurer with which the risk is bound.
Policyholders need an insurance binder only if they need to file a claim before they receive their formal policies.
Certificate of Insurance
A certificate of insurance is evidence of insurance that you have coverage for a specific period. A COI can be issued by an insurance company or broker. A COI always has the policyholder’s name, policy effective and expiration date, the type of coverage, policy limits, and other important details of the policy.
A certificate of insurance contains sections for different types of liability coverages such as general, auto, umbrella, and workers’ compensation.
Other than coverage levels, the certificate includes:
- The policyholder’s name.
- The policyholder’s mailing address.
- A description of what is insured.
A certificate of insurance is always good as it shows your clients or business partners that your organization is insured for all risks. It makes your clients or shareholders feel safe.
So Binder and Certificates are not the same.