Posted on: 11 May 2022
Most insurance companies allow regular and upfront premium payments; for example, you can pay your monthly or annual premiums. The upfront payment does not look attractive since it requires a significant investment. However, upfront payment has several financial benefits.
Below are some of these benefits.
Many auto insurance companies award discounts to those who make upfront payments. Your upfront pay shows that you are committed and financially responsible. The discount is both a reward and an incentive for similar behavior.
Upfront payment also means that you cannot default on your premiums payments. The no-default surety is a financial win because payment default can cost you money in several ways. Below are some ways a default on your insurance payments can cost you.
Many insurance companies charge late fees to those who delay premium remittances. The late fee is an administrative charge to process the late payment and a penalty to deter future lateness.
Cancellation or Nonrenewal
Your insurance company may refuse to renew your coverage if you are regularly late with your payments. The insurance company can even cancel your policy if your payments delay beyond the grace period. Cancellation or nonrenewal means you have to acquire a new policy and carrier, which might be more expensive than your current ones.
Problems with the Authorities
Most state governments require all drivers to have liability insurance. The authorities might stop and cite you for driving without insurance coverage if you default on your premium payments. The penalties include a monetary fine, license suspension (that attracts a reinstatement fee), and even potential jail time.
Claim Denial in Case of an Accident
One of the worst things about default is that the insurance company might deny your claim in case of an accident. Say you decide to run a quick errand to the grocery store after defaulting on your premium payments. The insurance company might leave you to bear the car repair cost if you crash the car on your way back.
Credit companies use your bill payments and loan habits to calculate your credit score. A payment default will reduce your credit score. Insurance companies use your credit score to calculate their rates. Thus, you might pay more for coverage if you have a payment default in your insurance history. The carriers will also use the coverage gap to increase your rates.
Hopefully, you will get affordable premiums to help you maintain your coverage status. Talk to your auto insurance agent for further tips on your car insurance purchase.Share