There are many times in a person's life when he may need insurance of one kind or another. The most common types of insurance are health, automobile and life. There are specific qualifications that must be met for each one before you can be accepted into a plan, and sometimes the approval process can take many weeks. During this time, it can be invaluable to have "bound" coverage.
When a person has "bound" insurance coverage, it means that an insurer has temporarily extended him coverage, while the underwriting company is reviewing his application. This coverage is extended based on the assumption that the applicant will be approved for the insurance plan that he applied to. Bound insurance can be offered by a variety of insurers, including those who offer health, auto or life coverage. Applicants are required to pay all of their first premium in order for the bound insurance to become active.
Depending on the amount of your premiums, the type of insurance and coverage you are applying for and the state that in which you live, the amount of coverage you receive while in the bound or introductory phase of your insurance policy can significantly vary from the standard coverage to which approved applicants are entitled. If your insurer offers you bound coverage, you should make sure you are well informed of the exact type of coverage you have while awaiting final approval.
Insurance approval can take as long as several weeks, so having bound insurance coverage can be an invaluable source of comfort should an accident or illness occur before you have been fully approved. If an applicant with a bound life insurance policy dies while his application is under review the death benefit can be paid, as long as the first premium was paid and the application ultimately approved. Likewise, having a bound insurance plan can save you time and money while you await your standard coverage.
When you apply for an insurance policy, you should ask if the carrier provides bound converge, and if so, what that entails. Remember anything can happen during the several weeks that it may take for the insurance underwriter to approve your application, and when it comes to your safety, it is always best to err on the side of caution.
- Photo Credit Spencer Platt/Getty Images News/Getty Images