In the chaos of day-to-day personal or business life, bills can pile up. It’s not uncommon at some point to forget about a bill payment or feel that end-of-the-month crunch with a tight budget to consider deferring payment and incurring a late fee.  However, insurance premium payments are different from other bills…there’s more at stake. Late payments can impact your premium costs and insurability.

Late fees & other costs

Although your insurance provider might offer you a few days grace period before issuing a cancellation notice, you will most likely be assessed a late payment fee for being past due. In addition, late payments can impact your insurance score, which is a rating calculated by insurance companies to represent the probability of an insurance claim being filed and can impact the premiums you pay. Payments need to be received by the due date, so leave enough time for delivery.

Cancellation

If you fail to make a payment, an insurance company has the right to cancel your policy and will issue a cancellation notice within a few days of not receiving payment. If payment is not received by the cancellation date, your policy will be canceled, and the company may choose not to reinstate it.

If they do allow you to reinstate your canceled policy, they typically will require not only funds for the missed payment but also the next payment, and in some cases, may require payment of the remaining premium in full. So if finances were already a challenge causing a late payment, it will be more costly to get your policy reinstated.

If they choose not to reinstate your policy, you’ll have to find a new insurance provider and could have to pay a higher premium for the same coverage or have difficulty finding a company to insure you.

Consequences of being considered a high-risk client

Missing one or more insurance payments can result in you being considered “high-risk” by insurance carriers. When your policy expires and is due to be renewed, your current insurance company may:

• increase your premium or;
• decide to not renew your policy, which effectively cancels it requiring you to find a new insurance provider.

When applying for a policy with a different company, it will ask and verify if you’ve been canceled for nonpayment, and as a result, it may:

• require one annual payment not allow you to pay in installments and;
• charge you a higher premium; or 
• not want to insure you even if you have a spotless claim record.

If you can’t obtain insurance from a preferred “standard” carrier, then you may have to buy coverage from a “nonstandard” carrier that accepts higher risk, or you may have to go through a State program, which is referred to as assigned risk. Both these options will almost always result in having to pay higher premiums to obtain coverage.

How to Avoid Missing a Payment

With the above in mind, there are lots of reasons to avoid missed payments, and you can do so with a little planning. Here are some ideas that can help:

• Automate payments using EFT automatic withdrawals. Avoids you having to remember to make manual payments. If you’re paying in installments, you may save money by eliminating installment fees. Be sure to use an account that you use regularly that doesn’t require a special transfer of funds to cover the payment which is a leading cause of missed payments. 
• Pay well in advance of your payment due date. Depending on how you are paying, be sure to leave enough time for the payment to be delivered. Postal mail is slower than it used to be, and even online banking can take a few days for payment to be made. 
• Pay in full if you can afford to do so. Installment payments can be helpful with cash flow, but making one payment reduces the chances of missed payments. Paying in full can sometimes save you money with a pay-in-full discount, and you also avoid installment fees.

If you’re having difficulty making a payment, please call and speak to your agent to discuss possible options. Don’t wait until your policy is canceled because it only causes more headaches.