Premium Payments: Am I Still Covered If I Miss a Few?

January 27, 2012

Your insurance company has the right to cancel your policy after a 10-day notice if you fail to make your premium payment on time. This notice may be in the form of a simple reminder asking you to pay the past-due monthly premium charge along with a late fee.

Do Rates Increase?

Missing a payment does not necessarily mean you will be forced to pay higher premiums once you reach renewal. However, payment history is onc deciding factor that insurance companies look at when deciding what type of risk you are. You might lose any discounts available at renewable time. Sometimes when missing a payment, your company recalculates your outstanding balance resulting in a smaller number of remaining payments and each installment may now be a different amount than it was before.

Grace Period

Each month there will be a grace period accompanying the final payment date. Although laws differ from state to state regarding of a grace period between the final payment date and policy cancellation is required, most company policies have a grace period as a standard feature. However, in some states if the premium is not paid by the due date the policy is automatically canceled. In some states, a grace period must expire before a company can issue a cancellation notice with a state mandated notice period. In many states, a standard 15-day period must be stated in any cancellation notice sent to a consumer. This will allow you that period of time to either come current with your premium payment or make arrangements for different coverage. Some states allow for an automatic cancellation notice to accompany every monthly billing that is sent 10 days prior to the due date. The billing notice informs the client that the policy will cancel 10 days after the due date. Furthermore, companies in these states are allowed to cancel polices for consumers who fail to make timely payments. The regulations concerning when coverage actual ceases vary from state to state. Many cancellations will include a phrase stating the coverage will cease at “12:01 on ------.” Others simply refer to a specific date. You should check with your specific state insurance commission for specific local rules covering just how long after your due date your policy will be canceled.

Late Fees

Late fees are regulated state to state and in most cases only dictate what maximum amount a company can charge when premium payments are not made on time. Companies set the time late fees are applied and these can vary from 5 to 15 days.

Automatic Payments

As you can see, keeping your insurance premium payments made on time is an important part toward maintaining valuable coverage while protecting not only your present financial standing, but future ones as well. A great recommendation is to investigate if your monthly premium can be paid through payroll deduction where you work. If your premium is automatically deducted from your paycheck and submitted to your insurance company each month, you’ll always be on time maintaining an excellent payment record.