Late Payments - Dangers

Most of us have probably done it before and by the looks of things it isn’t something that is that bad. What I’m referring to here is paying your car insurance premium past the due date. You might not realize it but there is certainly something more dangerous than having to pay the late fee. You could be endangering your current policy and also your future with the current car insurance company. Let me explain.

Let’s look at the worst case scenario so you can at least have a good understanding of what can possibly take place. It may even be the case that you have already mailed your check in the post before the due date but due to some mail mishaps the insurance company receives your check past the due date. Some insurance companies are very particular about it and will have a clause in their policies that basically says that should your insurance policy lapse without another payment to update the account that you will not be covered. Imagine driving around without insurance coverage.

In any fact, even if the insurance company has already received your premiums it will take them a few days just to process the check too. In most cases the time it takes between when you car insurance policy lapses and when your account is back in the green, you are uninsured. Most people go around their daily lives not even knowing this fact. For many they would just assume they are insured and be happy with that.

Sometimes there might be a problem with your check of in the worst case scenario, the insurance company no longer wants to do business with you because of the late payment and decide to send the check back to you. Most of the time insurance companies will write you a letter to tell you what has happed but will normally not call. So until you receive your check and the letter you will not have realized that you are not covered at all.

So, since we are looking at the worst case scenario here, let’s assume that within this window of “non-insurance” you actually are unfortunate enough to get an accident. You still have no idea that you aren’t covered until you actually make the police report and you call the insurance company to tell them about the accident. There is no way to take the devastating news easily. Even if you argue with them that you have already paid, it is certainly likely that the insurance company will send the check back to you.

Being involved in an accident without insurance is a terrible thing. You will almost certainly lose your license because you are driving around uninsured. Even if the accident isn’t your fault you have to be ready to lose your drivers license for at least a year. If you are at fault it could even be worst for you. You will be responsible for whatever claims the other parties ask for which could certainly bankrupt you if you can’t careful.

In a less serious condition late payment could be the deciding factor in the car insurance company issuing you a “non-renewal” notice. Basically it is the insurance company telling you very kindly that they don’t want your business anymore. It doesn’t just mean that you can go look for another insurance company and get the same product. Most insurance companies will know of this “non-renewal” notice and also be wearier of you. You could be asked to pay higher premiums or even just having other insurance companies flat out not wanting to do business with you too.

This doesn’t only extend to car insurance companies. Late payment on relatively large yearly payments like car insurance premiums can have a very negative mark on your credit score. You would find that you might have to pay more for loans or even have certain loans and credit cards declined just because you paid your premiums late.

The best thing to take away from this is to always pay your car insurance premiums in time. On the date that your car insurance policy lapses, call your insurance agent to ensure you are still covered. If you aren’t or if processing takes a bit longer than usual, take the bus. If you can’t pay your premiums immediately because of cash flow problems then you can negotiate with your agent to allow for bi-monthly payment.