One of the most important skills to have as an insurance agent is the ability to explain processes and forms in a clear and understandable way to his or her commercial property clients. An example of something that may not be familiar to clients is an insurance binder, or a temporary authorization for coverage before an insurance policy is issued. In this process, underwriters thoroughly investigate pertinent information, such as risk factors, and then either offer or refuse to offer the policy. As an agent, it is important to make sure clients understand that insurance binders are temporary documents and do not represent an official policy.
While it is important to thoroughly discuss the insurance binder with the client, insurance agents should not forget to write a letter that provides details about the purpose of the binder. Letters can be sent via email, fax, or mailed in a traditional envelope. These notifications are used to ensure that commercial property clients completely understand the purpose of the binder and assist in controlling potential problems.
Insurance agents should help their clients understand that an insurance binder is a temporary authorization for insurance and not an insurance policy. Agents must inform clients about the process used by underwriters, since liability needs to be validated with thoroughly analyzed, accurate information. Any problems with these documents and processes would force underwriters to modify the policy, which would also require clients to evaluate changes before approving the document.
One advantage of using an insurance binder is that it provides authorization for insurance without having to wait for underwriters to issue a policy. This means clients do not need to halt business operations because they do not meet insurance requirements; they can continue conducting business as usual. However, during this phase clients might require extra attention and immediate notification of updates and any complications.
While a binder is in place, underwriters will verify that the insurer can safely accept the liability from the new policy, since there may be several risk factors not reported during initial discussions with the commercial property client. Agents should inform these clients that underwriters may discover information that may cause an insurer to refuse to offer the insurance policy. As an insurance agent, it is important to resolve problems quickly.
Learn More About ASI
Procedures regarding binders can vary from one company to another. To verify if you, an agent, are using binders correctly, you should always check with each individual carrier. For more information about ASI’s commercial department, visit https://www.AmericanStrategic.com/Products/Commercial.aspx