In most instances, an application for insurance must undergo an underwriting process to ensure that the applicant meets eligibility requirements. An insurer and applicant often enter into a temporary insurance agreement (TIA) which provides temporary coverage during this evaluation period.
A TIA typically includes certain conditions. For instance, if the applicant for a life policy dies during the application process, the company may provide coverage only if the underwriting process eventually determines that he would have been eligible for permanent coverage had he lived. If the applicant was struck and killed by a car due to no fault of his own, for example, the company would honor the agreement.
Even though a TIA is only meant to provide coverage for a short period of time, it still is a significant document. For example, if a claim occurs during the agreement period, the insurer may still be liable to pay the full amount of a claim unless the agreement specifies other conditions.
A TIA may be used in most types of insurance, such as during the life insurance application process. In auto insurance, an agent may issue a binder that provides temporary coverage if the applicant is currently uninsured but needs to drive immediately.
Depending on the line of insurance for which it is issued, a TIA may last from several days to a few months. In the case of life insurance, for example, a TIA could be in force for as long as 90 days.
Certain situations may make a TIA null and void or reduce the amount of benefits paid if a claim occurs while it is in force. For example, if the insured was found to have lied about not having a certain medical condition, the insurer may have the right to rescind coverage and not pay the claim.