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A cover note is a legal statement from an insurance agency showing that coverage has commenced even though the insured person has not received a formal policy yet. It serves as proof of insurance for cases where this is required, and also acts as an assurance to the insured party. When the formal policy arrives, it will come with additional documentation to replace the cover note.
A classic example of a situation where a person might need a cover note is in car sales. It is a good idea to insure a car as soon as the deal is closed, in case the driver gets into an accident on the way home or shortly after making the purchase. For drivers who intend to use loans to finance the purchase, the lender usually will not provide a loan without proof of insurance, and the driver will need to be able to provide a cover note to show that she has secured a policy. The insurance company can open a policy over the phone to get the driver covered before she leaves the lot.
The cover note provides all the basic policy information, including the insured's name, policy number, and type of policy. It will list any beneficiaries and also includes contact information for the insurance agent and company. Drivers can carry cover notes to present to police or other authorities who request proof of insurance, and the form must be accepted like a regular insurance card, as long as the dating information indicates it is current.
Insurance companies will print the expiration date on the cover note, typically 15 days after it is issued. If the insured party chooses to decline or cancel the policy, she will not be able to use the note to falsely claim evidence of insurance, as it will be past the expiry date. Using a cover note for a policy that has been canceled is a form of insurance fraud and may incur legal penalties.
Insured parties should keep their cover notes even after receiving their formal policy information in case there is a dispute later about the start of coverage. The cover note will indicate the date the policy became effective and can help determine whether an event was covered by the insurance company. Old insurance documentation can also be useful for keeping track of how much has been spent on insurance over time, or for comparing terms between new and old policies. It is also possible to request a duplicate copy in the event an original is lost or damaged.
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