What is an auto insurance binder letter?

A car insurance binder letter gives you temporary coverage during the underwriting process. You should request a car insurance binder if you need to drive before you get full proof of insurance.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Sep 15, 2020

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Here's what you need to know...

  • An auto insurance binder letter is a form from your car insurance company that lets you temporarily drive with coverage until the underwriting process is complete
  • The underwriting process involves verifying the information that you submit on your car insurance application
  • If you need to start driving your car before the underwriting process is complete, you can request an auto insurance binder letter from the insurer

An auto insurance binder letter is a way for you to have temporary car insurance coverage while the underwriting process is being completed by the insurer.

Keep in mind that the terms of the auto insurance binder letter are not necessarily the same as what your policy will be. The underwriting process could produce information that changes the rate that you pay for coverage.

If you do not have an auto insurance binder letter while you are waiting for final approval, then you technically do not have the required auto insurance that you need to drive your car.

You need to keep a copy of the insurance binder until you get a permanent proof of insurance card.

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When You Need an Auto Insurance Binder Letter


If you sign up for car insurance online, you may be offered instant proof of insurance through a temporary form from the insurance company that you can print out right away.

This is the same as receiving an auto insurance binder letter in the mail from an insurance company during the underwriting process. Do not skip this step because you do not want to have to deal with being pulled over and not having the right insurance.

If you are not offered a temporary insurance binder letter from your car insurance company, then you should request one.

If you apply for insurance over the phone, the insurance company would be able to mail you a binder letter or make one available at the local insurance office for you to pick up in person.

Once you receive your permanent proof of insurance, you no longer need to keep your auto insurance binder letter. The proof of insurance card is all you need to show to a police officer or another driver if you are in an accident.

If you do not receive a final proof of insurance card, you should follow up with your insurer.

Do not wait too long because the temporary auto insurance binder letter could expire, which means that you would not have any coverage at all while driving.

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The Underwriting Process and the Premium You Pay for Auto Insurance

During the underwriting process, the insurance company is trying to figure out what the particular risk is to insure you.

They base this calculation on a variety of factors, including:

  • The type of car you drive
  • Your driving history
  • Credit score
  • Where you live
  • Whether you are currently insured
  • How long you have been driving
  • Driving history of other drivers in your household

The car insurance company will ask you for this basic information and will then use their own methods to verify it, such as checking with a credit reporting agency.

Insurance companies will consider credit and insurance scores in evaluating an applicant for car insurance. If you think you may have an issue with your credit score, it can be useful to order a copy of your credit report to check it for any discrepancies.

Working to improve your credit score is one way that you can try to lower the rate that you pay for car insurance.

There is no set formula for calculating your insurance risk as a driver. Every company is allowed to consider these factors according to their own equations.

This is the main reason why you will get different quotes from different auto insurance companies. Some companies can rely on certain factors more heavily on others, which influences how you will be rated in terms of risk.

Keeping Proof of Insurance

Even if you are sure that you are going to obtain a permanent auto insurance policy, you still need to have proof of this in the meanwhile.

Every state has different penalties in place for what happens if you are caught driving without the necessary car insurance.

If you are penalized for driving without insurance, this will show up on your driving record and could mean that you end up paying more for car insurance down the line.

Basically, an auto insurance binder letter is a way to show temporary proof of insurance while you are waiting for the final policy from the car insurance company.

Because you are required to have car insurance in order to drive a car, an auto insurance binder letter is a way to show coverage while you are being evaluated through the underwriting process by the insurance company.

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