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Is a Binder Still Good if My Insurance Cancels for Non-Payment?

If an agent issues a binder for 30 days but the policy on which the binder cancels during that period, the insurance company will, in most cases, honor the coverage listed on the binder until the end of the period. Be very careful that you understand that the binder covers just the lender's interest and for the coverage on the vehicle or property. If your policy contains liability coverage, chances are that binder didn't provide guaranteed liability until the end of the binder period. So, that portion of your policy may have ended when your underlying policy cancelled. For example, you buy a car on a Friday. You had a car insurance payment due before you bought the car and are now in your grace period. Let's say your policy cancels on the following Saturday and you still haven't paid the bill. Just because your agent issued a binder to the auto dealership for 30 days so you can get the car off the lot does not mean that you will be covered for liability to drive the car past the cancellation date without paying the premium. All that means is that the lender will be covered for the physical damage portion of the policy until the end of the binder period, even though the insurance company hasn't received money to cover that extra time. The insurer will then give notice to your lienholder that your policy is cancelled and they will indicate the date to which they will extend the courtesy coverage to the lender. The similar situation would happen on a home policy. Let's say you are refinancing your house and your agent issues a binder on an already owned home and an existing policy. But, let's pretend that your home insurance policy is being drawn from a your bank account but the attempt to draw the funds is unsuccessful and the policy cancels within a certain period of time. If the binder extends beyond the cancelation date, it would only be to protect the lender for their interest in the home, not you the owner.

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