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Late Auto Insurance Payments

Late auto insurance payments are more common than most of us would care to admit or even think about. For many people who pay for their policies quarterly or monthly, it is always a struggle to come up with the necessary funds to pay the premium when it comes due. It is a shame that we can't just pay it in full at the policy inception and just be done with it. It would be great to not have to worry about the speed of the mail service or about losing our bill or just plain forgetting. But the truth is that most of us simply do not have the money to prepay for a year's worth of auto insurance. If we did, there would be no need for installment plans. Late auto insurance payments are particularly troublesome for younger people, although they can and do happen to people of all ages. They are an annoying and potentially disastrous occurrence, because an auto insurer can cancel a policy subscriber for just one lat payment, even if it is only a day or two behind schedule.

Late Payments Can Bring Cancellation

According to the standard terms of most auto insurance policies, insurance providers can (and sometimes actually do) cancel their policy holders for just one late payment. This action has been taken from time to time, although it is certainly not the rule. But it is important to know that as a subscriber to an auto insurance plan, you have a responsibility to make timely payments. One important note to attach to this train of thought is the fact that in most cases, even if policy subscribers do not get cancelled due to late payments, during the time between the payment due date and the date of arrival of their payment they do not technically have any insurance. So if the unfortunate circumstance of a car accident becomes even more unfortunate because it falls during this window of time, your insurer likely has every right according to the terms of your contractual agreement to deny any claims you might try to file, based on that late payment.

Many drivers mistakenly think that some sort of grace period exists as an industry standard. 30 days is a common assumption in this regard. They think that if they could just get that payment in within a month, they will be fine and their policies will go on uninterrupted. But the truth is that most major insurers will actually cancel coverage immediately for nonpayment. This is because of exactly that nightmare scenario discussed earlier. They cannot be held responsible for covering you in an accident while keeping their fingers crossed that they'll eventually get your payment.

Some Cancellations are Not Permanent

With this all being said, it is also useful to point out that in situations where a small delay occurred in the arrival of a premium payment, while the policy may have been terminated for that short time period, it will often be reinstated and the insurer will often regard the short period intervening as if it didn't happen. In other words, as long as you start making timely payments again, you will not have to pay higher rates for having a cancellation on your record all of a sudden. This is done as a courtesy to the policy holder, not out of any obligation.

Most insurers will not cancel coverage for a single late payment because they would rather keep you as a customer. But if it becomes a pattern, it becomes clear, even to an online insurer that you represent a bad risk, because they have no idea on a month to month basis whether or not they will receive timely payment for the premium due. They are obligated to deliver insurance protection every day of the policy period, and they have the right to expect to be financially compensated for every day just the same.

Policy Cancellation Affects Credit Score

The reason cancellation impacts auto insurance rates going forward is that it really does a number on your credit rating. The effects of auto policy cancellation are most severe at first, and less pronounced as time goes by and you reestablish a pattern of on time payment, but those effects are felt for quite some time. And the damage to your credit will cost you money in other areas of your financial life as well.

One of the best ways to avoid late payments and all the trouble they can cause is to set up an automated payment with your insurer. These payments are deducted in exactly the amount due on exactly the due date from your checking account. The only caveat is that you have to have sufficient funds on the due date for payment to proceed.


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