What Is a Title Binder?

Malcolm Tatum

Title binders are types of insurance coverage that are associated with real estate while an acquisition of the property is taking place. The title binder is only a temporary means of maintaining insurance on the property. The expectation is that as soon as the property is closed, the new owner will take steps to secure permanent insurance coverage for the acquisition.

Businessman with a briefcase
Businessman with a briefcase

While not required in all nations, the title binder is considered essential in many localities. The main function of the temporary insurance binder is to protect both the incumbent and prospective owners from loss while the details of the acquisition are worked out. Provisions for coverage within the binder may vary, depending on local laws. Typically, the binder will provide protection against theft, natural disaster and general damage to the property during the period between an offer to buy and the actual closing.

The title binder is often considered an essential before a real estate agency will list a property. In format, the binder is a simple document that attests to the current status of the coverage, and defines the terms and conditions associated with the coverage. It is not unusual for jurisdictions to impose minimum coverage requirements that must be met by the binder before the property can be properly sold through an agency. A copy of the binder is usually kept on file with the real estate agency for as long as the property is placed with the agency.

Temporary insurance binders only remain in effect until a new permanent title is issued to the buyer of the property. At that juncture, the new owner is responsible for providing evidence that the property is covered under a permanent arrangement. It is not unusual for mortgage brokers to assist new owners in acquiring permanent insurance that will supersede the title binder, and periodically check to make sure permanent coverage is being maintained by the owner.

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