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People do like I do when paying bills. I often find myself writing the check, sealing the envelope and holding onto it until a couple days before it is due. Sometimes I do it to allow a deposit to be made before sending the check, but sometimes I do it just out of the attitude that I don't like to send my money in early.
The repercussions of not sending in a premium payment on time can be severe in the case of an insurance policy. We mistakenly think of our insurance bill as being the same as a credit card bill or a utility company bill. In the case of a credit card, a late payment is accepted with perhaps a small penalty charge for the late payment. A utility company will often gladly accept our late payment, even sending us a second notice to remind us that we're running behind.
Some insurance companies will send a second or late premium notice with a cancellation warning printed on it. When this happens, people fall into the habit of waiting until they get the late notice and then paying it just in time or missing the late date and hoping their late payment will again be accepted. Such late payments open an insured up for a great risk of going without coverage.
Perhaps confusion arises because people assume that they have a grace period. There is a grace period allowed for life and health insurance policies - with perhaps some exceptions.
Referencing Black's Law Dictionary, 5th edition, a grace period is "a period beyond the due date of premium (usually 30 or 31 days) during which insurance is continued in force and during which payment may be made to keep the policy in good standing."
There is no grace period, however, for property and casualty insurance - the kind that covers homes and autos. If an insurance company receives a partial payment for an auto policy, it will bill for the next installment of premium before it is due. Even though the policy is issued for a six month or annual term, it will cancel when the partial premium has become used up or earned by the insurance company.
Sometimes this critical date is printed on the billing, but not always. A premium cancellation date is not the same as the requested premium due date. If payment is not received in time, the company is no longer contractually bound to provide coverage. You didn't fulfill your half of the bargain.
They agreed to insure you and you agreed to pay your premiums on time. If an accident occurs after the equity or cancellation date has passed and the premium is outstanding, the insurance company will not be held liable for the accident and is not required to accept the over due premium.
Even if an accident did not occur after a policy has cancelled for late payment, the company has the right to re-underwrite the insured as a new risk, causing him to meet their stringent guidelines for new business.
If an insured driver had a couple of tickets or an accident in the past, the company will likely rewrite the risk in their lesser-discounted company - causing the policy to renew with a higher price. They may choose to decline to rewrite or renew the policy due to a bad loss record or poor payment history. It costs companies a lot of extra labor and postage to send out late notices and part of underwriting includes this concept in controlling their costs.
Mail delivery is not always perfect and computers can misprint a bill or mess up in the envelope insert and delivery process. Even though such errors might occur causing you to not receive a bill, that doesn't mean you don't have to pay.
These problems can be avoided by simply sending in the premium payment promptly. This is why premium notices for insurance policies need to be handled with care and in a timely fashion. It can save you a lot of hassle and keep you covered.
Schedule your premium payments on your calendar, or if you use a checkbook program such as Quickenr, save them as scheduled transactions. Ask your insurance agent about your company's billing and payment procedures and time lines. Also ask your agent about the option to pay by bank draft or credit card payments which in some cases reduce the billing fees and can ensure your policy is paid on time.
Russell Janecka is a Certified Insurance Counselor. He is the owner of Janecka Insurance Agency in Victoria, and serves on the board of directors with Germania Insurance Companies. (361) 573-4475 e-mail: info@jiavic.com |