Although budgets can get really tight some months, be aware that you really can save money by paying insurance premiums on time. Like most businesses, insurance companies do not consider non-payments lightly. In an industry in which premiums are calculated according to various risk characteristics (age, experience, claims, geography), insurance history plays a big role too in determining whether you qualify for insurance with a certain company. So you better believe that a policy cancellation due to non-payment shows up on your insurance history records.
Avoid policy cancellation
When an insurance company cancels your policy for non-payment, it follows you around for three years. Every insurance company that you attempt to get insurance with for the next three years will see that you were cancelled for not paying your premium. That is the same amount of time a minor ticket stays on your driving record, which tells you they do not take these occurrences casually. Insurance companies and their clients work in an environment of honesty and trust. Insurance companies are not lining up to do business with clients they cannot trust to keep up their end of the insurance contract, which means that the companies who are willing to take you on will likely charge you a higher premium. Do you really want to be paying higher premiums because you missed a payment?
Avoid upfront payment
Having one cancellation for non-payment is bad enough, add another one on there and the majority of standard market insurers will not be an option. When you do find a company that will insure you, you are looking at paying your premium upfront – no payment plans, no monthly withdrawals, just 100% right away. Annual premiums are usually a few thousand dollars, and that can be difficult to handle all at once.
Even more expenses you can avoid
There are more costly reasons to stay current on your insurance payments:
- NSF charges: not only will the bank charge you for an NSF occurrence but the insurance company will likely charge a penalty too, anywhere from $25 to $50 in addition to whatever the bank charges.
- To have a policy re-written after it has been cancelled, most brokerages charge a re-write fee to cover administrative costs associated with finding and binding new insurance.
- With home insurance, if you have a mortgage, your bank is notified of the cancellation. If your mortgage is dependent upon having home insurance, a non-payment cancellation can allow the bank to add on its own home insurance cost, which can be expensive.
- If there are any gaps between coverage because of a cancellation, insurance companies often require a home inspection to make sure it is in good condition and an inspection is another unnecessary expense.
We don’t want you to have any nasty surprises so our best advice is to stay up-to-date on insurance payments. You will save yourself money in the long run as well as avoid the headache of scrambling to find a new insurer.