Unlike a certificate of insurance or an insurance policy document, a cover note definitively provides the insured person with proof of coverage during the period when their insurance paperwork is still under process. The document duly states the details including the name of the insured, the insurer, the scope of coverage, and specifically, what is being covered by the insurance.
While not a term used frequently within the United States, a cover note universally represents temporary evidence of insurance. One might often come across this term in the international insurance markets.
Cover notes, serving as interim proof of coverage until the formal policy documents and certificates are issued, maybe subject to the insurer's further assessment of the risks involved in insuring the cover note holder.
Though generally, these notes provide the same coverage level as the final insurance policy, the insurer may impose certain restrictions during their final risk determinations associated with the insurance policy.
The cover note's validity length primarily depends upon the insurance company's speed in formulating a new policy and any potential policy-coverage related issues between the policy's sale and its documentation issuance. Considerably, if the policy documents don't reach the insured before the cover note expiration, the insurer either extends the cover note validity automatically or upon request.
In the insurance world, one can cancel a recently purchased insurance policy that lacks formal policy documentation, allowing someone who holds a cover note to claim a refund, given no policy claim has been made during the cancellation period.
Cover notes prove significantly beneficial, especially during vehicle purchases through loans. Lending institutions generally won't let a buyer, now a vehicle owner, to take the vehicle off the lot without coverage assurance.
Buyers usually ring up their insurers, purchase the policy via phone, and procure an immediate cover note through email or fax, enabling them to take the vehicle home. However, this measure is typically adopted if the insurer can't hand out the insurance certificate instantaneously. Interestingly, some insurers do not issue cover notes, setting an exception by providing an immediate certificate of insurance upon policy purchase and acceptance.