General, Insurance
Insurance 101- The Learning Curve Series: Insurance Binders
February 5, 2009 by Scott Richardson · Leave a Comment
What is a binder and why do I need one? When you are buying a piece of Real Estate you typically leverage your purchase and put some of your money as a down payment and secure the balance with a Mortgage. The lender wants to make sure you that you are a good risk and that the property is protected in the event of a loss so they don’t lose the money they loaned you. This is their investment in your property.
The lender then requires you purchase Insurance naming them as a loss payable on the policy. The Insurance Agency then applies for a policy and issues a Binder (coverage) and sends it to the lender. The Insurance Company then reviews, inspects, and evaluates the application and if acceptable issues the policy.
It is important to get this part of the process handled before going into closing the transaction (No Binder no Loan).
