Purchasing insurance is a long-term commitment to any car owner. Like any other payments, timely payment is vital. It can be painful to go to the bank and find the balance dropped as a result of insurance premium deduction. The pinch is even more if you happen to be serving a loan or experiencing a financial crisis.
In such a scenario, surrendering your policy comes as an additional choice in a dilemma. Surrendering the policy means that you will lose the protection against any peril that may occur.
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Effects of Late or Missed Payment
While there exist a myriad of insurance companies that will not terminate your policy after a few days, most often they have the right to. Late payment may attract higher premiums in future. It signals to the car insurance company that you exposed increased risk to the insurance provider.
Cancellation of insurance
After your grace period to pay has expired, the company has the mandate to terminate or cancel your insurance. In this case, if one may need to shop for new insurance after cancellation, things may get tight. Applying your new insurance cover calls for a historical perusal. If the company realizes that you have been canceled for non-payment of premiums with the former company, the company may deny you the service.
Your spotless driving record may not be considered in such a case. If you do not update your insurance policy in time, chances of your policy lapsing are high.
Annual payment penalty
In case you are lucky, the insurance company may give you a go-ahead under conditions. You will not be allowed to have acquired insurance through an installment plan. Instead, one will be required to pay annually. Altogether, you will not enjoy any benefits.
Soiling your credit record
Many insurance companies may also take into consideration your credit history as they set their prices. The underwriters to these companies have a weird belief that those with bad credit are liable to get involved in an accident. The credit history is used to classify drivers. If your record is wanting, you will be viewed as a credit risk. In a worst-case scenario, the insurer may force you to buy auto insurance from a higher-risk carrier.
What If You No Longer Afford the Premium?
Sometimes, you may realize that the surrender value that has accumulated discount in comparison to what was initially paid. In this case, selling your insurance to a third party becomes an alternative. Selling your insurance policy to the third party does not terminate the policy.
The third party takes the responsibility of paying the premiums. He/she has the power to choose whom to receive the payout. It also implies that you lose coverage as well.
Although it may inflict a queasy feeling of a stranger benefiting from the loss, selling your insurance will fetch you an upper price than surrendering your policy.
Any Room for Apologies?
Going past the grace period will always attract a lapse. What if you are still in dire need of coverage? The answer lies in what is known as a reinstatement. Reinstatement is the process of getting your insurance reinstated. State laws for reinstatement differ from nation to another.
However, each state will support you if you need to re-apply for fresh auto-insurance coverage. Most of the insurance companies allow the insured to apply for a reinstatement mostly in less than five years after your grace period.
Typically, a car policy reinstatement comes with the same insurance carrier, policy number, and coverage terms. Getting an insurance reinstatement benefits you in that you will be protected against high risk and insurance quotes. It is advisable to stick to your insurance agent if you are benefiting from its nice customer service
Tips for Preventing Late Payment
Making clear your terms: It may sound obvious, but it is wise if you iron out your terms of payment to the insurer. This information puts plain the expected date of payment. The payment terms should be contained in your agreement with the company.
Ensure that the bank details are clear on your invoice from your insurer in order to evade the excuse that the client failed to make payment. You will also need to automate your online payment means. Nowadays, some accounting software can issue an automated reminder through letters. They do so as a reminder when payments are overdue.
Benefit of Timely Payment
Early payment of premium is a practical way to avoid unnecessary fees. It makes one be listed high on the credit list. You will definitely increase your chances transferring to other insurance company. Early payment also makes one appear a responsible customer. This presents a low risk of nonpayment. It will cut down the high auto-insurance premiums and harsh penalties. There is also reduced chances of high financial risk in the event of an accident.
Falling a victim of failing to pay your premium is the last thing you want to encounter. Following the above-mentioned consequences, one is left without an option to pay in time. This timely payment is not without benefits. What happens if you don’t pay your car risk insurance is the last question you will want to answer. The best way to keep yourself safe from is to get updated as you play your role.
Overall, it is only wise to have in mind that payment of car insurance premium is just like any other payment.