By: Advocate Brokerage
Just a few short years ago, forgetting to pay your insurance may have been a headache, but it would’ve been relatively easy to get your policy reinstated. Not anymore. More often than not, a lapsed policy creates challenges for individuals, even in the luxury home and vehicle insurance marketplace. But why?
When your vehicle insurance lapses, you are not only left without coverage, but you might be fined by the insurance department. And when your policy is cancelled for nonpayment, your credit score (one of the determining factors of your insurability) takes a hit. While most insurance policies do allow a short grace period, if you’ve missed your payment by longer than allowable, your insurance may be canceled completely. In this case, you’ll have to apply for a new policy, which almost certainly means paying higher rates.
That said, if your credit is stellar and you miss one payment, your insurance company may be willing to reinstate the policy. But if you have previous cancellations, own a coastal home, have had claims or accidents during the term, or your credit isn’t what it once was, you may not be eligible for reinstatement or for a replacement policy through a different carrier.
The vast majority of people have no problem remembering to pay their bills each month. But there are instances where a bill can slip through the proverbial cracks. For example, if you pay bi-annually and then close the paying bank account and forget to let your insurance company know, your account will show as closed. Your insurance company will send a late notice, and a cancellation notice via the mail and email if you are set up to receive correspondence electronically. Generally speaking there is a built-in grace period. Your insurance agent will likely attempt to contact you, but if you don’t read your emails or read your mail (depending on how you are set up to be notified), your policy is in peril.
If you do catch your missed payment in time, you may have to pay a late fee to save the policy. However, if your insurance is canceled by the insurer, there are plenty of financial ramifications to consider. Higher insurance rates, a dropped credit score, and even a suspended license are all possible consequences of having your insurance cancelled for nonpayment.
The single most important thing you can do to avoid late payments is to set up automated payments (often referred to as EFT). You also need to make sure to contact your agent if your payment information changes, such as if you get a new credit card number or switch banks. Ask your Advocate today about setting up auto-pay to avoid the pitfalls of nonpayment.