Sending in a payment for a bill is something that all of us have done before. Typically the charge is small or can easily be waived. However, sending in a late payment to your auto insurance company is a different story. The consequences of paying this monthly expense late can be costly and can create long term problems down the road.
While each company has a different set of guidelines that they follow
for late payments, there are some basic consequences to remember. Many
companies realize that late payments often go along with these
difficult economic times. Because of this, they often give you a 5- 10
day grace period before any action is taken. After this grace period
has passed a fee can be added to your account at the very least.
Insurance companies do have the right to terminate any policy once a
payment is shown as being late. While many will give the customer a
chance to pay, it is within their rights to cancel it all together.
It is not uncommon for companies to require that customers pay off the remaining balance of the entire full term contract once a late payment has occurred. This can be a large chunk of change at one time, but is much better than being dropped by a company.
Having an insurance company drop you can make it difficult and costly
to find another insurance company that will cover you. Having a
canceled policy will always reflect poorly on you, regardless of the
reasoning. A canceled policy will also make future insurance policies
jump in price. Many insurance companies see having been dropped off of
a policy as being a sign that you have been deemed a risk. Therefore,
your rates are likely to go up.
If a company does choose to add you to a policy, regardless of the dropped policy, they may make you pay the entire policy amount in one payment. An annual payment insures that you are covered and that you are paid up before it takes place.
The best way to keep any of this from happening to you is to set up an automatic payment through your insurance company. Almost all companies offer this service for free. Signing up for this eliminates the chance of a late payment ever happening, therefore eliminating the chance of any dropped coverage, polices or additional late fees.