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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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Feb 5, 2019

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Just as any other industry, insurance has a unique language. Furthermore, the language of insurance changes from coast to coast in the United States and is even different in Europe and Asia.

In some areas, a cover note is referred to as a ‘binder’. Both mean that insurance coverage as quoted is in force to protect your vehicles and drivers.

In the United States, a binder is a temporary certificate indicating that your car is covered by insurance until such a time as a policy is issued. In Europe and Asia, this temporary certificate is referred to as a cover letter.

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Why is a cover letter or binder important?

With digital communication, it is possible to issue an insurance policy as soon as the underwriting is approved; which can also be within the same day.

In some instances, however, verification of underwriting information and other data can delay issuance of an actual policy. A cover letter or binder provides proof of insurance until the actual policy is issued.

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Information Required on a Cover Letter or Binder

The below details are needed on a cover letter:

  • Inception, beginning, date and time of the coverage
  • Insurance company providing the coverage
  • Named insured (you); address, and lien-holder’s name, address, and phone number
  • Term of the coverage – usually 60 days. A policy should be issued within two weeks to replace the cover letter or binder.
  • Information on your vehicles: Make, model, and registration number of the vehicles – year of manufacture
  • The following information may be included, also: Engine and chassis number as well as the cubic capacity of your vehicle, seating capacity
  • Declared value or statement of actual cash value of the vehicles and included accessories
  • Signature of the agent as well as their name, address, and telephone number

Why have a cover letter or a binder?

There are practical reasons for issuing a cover letter or a binder until the issuance of a policy.

  • Provides proof of insurance for the police, your lien-holder, and for you in the event of an accident.
  • Provides coverage if the vehicle is vandalized or stolen

Be cautious to keep track of the cover letter or binder since it is valid proof of insurance for at least sixty days.

Before Obtaining a Cover Letter or Binder

A cover letter or binder is issued only to provide proof of insurance until it is replaced by an actual policy. You may receive this policy via e-mail for you to print, or by U.S. Postal Mail.

The insurance company will inform you of the method of providing the policy, whether by e-mail or Postal Mail.

Getting Insurance Quotes before Obtaining Coverage

To save money as well as to obtain the best coverage, obtain at least three quotes from different insurance companies.

Ideally, you should begin the process of obtaining quotes at least two weeks before your current policy expires.

The types of coverage you should consider are as follows, recognizing that each state has its own legal requirements.

Liability Coverage

This coverage provides protection for your legal liability in the event of an accident. Check with your state for exact limits required, but the following is suggested:

  • Bodily Injury Liability – $100,000 per person and $300,000 per accident to protect you if you are legally responsible for bodily injury to others in an accident.
  • Property Damage Liability – $50,000 per accident to protect you from legal responsibility for damage to others’ property


Physical Damage Coverage

Liability coverage does not protect you from damage to your own vehicle in an accident. Physical damage coverage provides protection for you, your cars, and your lien-holder. Types of coverage to be purchased are:

  • Comprehensive coverage – provides protection from animal damage, theft, vandalism, glass breakage, storms, and hail.
  • Collision coverage – provides protection if your vehicle is involved in a collision with another car or object


Insurance companies apply the deductible of your choice to physical damage coverage.

A $500 deductible is recommended, but a higher deductible may earn credits.

Other coverage that may be required by the state

These types of coverage sometimes are not required, but even so are desirable to purchase on your auto insurance:

  • $10,000 Medical Payments Coverage – to defray the costs of emergency medical procedures and transportation after an accident
  • Uninsured Motorists Coverage – $100,000 per person and $300,000 per accident – to help pay for injuries to you and your family if involved in an accident with an uninsured motorist.

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Examine the Status of Insurance Companies

Before purchasing insurance from any insurance company, you need to make certain that the companies are not only licensed in your state, but also financially secure and with few or any complaints with regard to claims. You can find this information from the following:

  • Your state’s insurance website – found under state government
  • National Association of Insurance Commissioners (NAIC) a national organization for information about insurance
  • A.M. Best – a national rating service for insurance companies
  • Standard and Poor’s – for information on ratings

Personal Information Needed by Insurance Companies for Quotes

When you request quotes from insurance companies, be prepared to give the following information:

  • Name, address, driver’s license number, and date of birth for each driver
  • Driving record for the last three to five years – each driver
  • Social security numbers for the main policy-holders – to verify credit information for rating purposes
  • Make, model, and VIN numbers for all owned autos
  • Usage of vehicles, miles driven per day, and yearly mileage
  • Desired coverage for each vehicle
  • Certificates for driver’s education classes, and/or defensive driving classes
  • Copies of school transcripts for students with a B or above Grade Point Average – school name and address should be included

Evaluating Quotes

Assess information on premiums, coverage, and insurance companies to choose the best as well as the cheapest insurance company for your insurance.

Be certain that you read the quotations and estimates of cost carefully to be sure that you acquire the coverage needed.

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Obtaining Cover Letters or Binders

Sometimes you cannot acquire insurance immediately upon the expiration date of your own insurance policy.

In that situation, request the issuance of a cover letter or binder to help you provide proof of insurance until the actual policy arrives.

Your lien-holder may require you to prove the existence of insurance to prevent the lender from issuing insurance that they may purchase for you.

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