Dramatic Effect of One Late Payment on Auto Insurance

A late payment of your auto insurance premium is something that you might not take very seriously unless and until you bear the consequences. Auto insurance is necessary, and if the premium for it is not paid on time, the negative effects can be dramatic.

Effect on Premium Rates

If you are paying the insurance premium on time, you receive a discount next time you renew the insurance policy. However, if you have paid the insurance late only once, you can be charged up to 40 percent more for your premium when you renew.

It is possible that you may decide to change insurance companies simply because you failed to pay the premium on time and the company is now charging you more for the same policy. However, before issuing a policy, the new insurance company will look up your record of insurance premium payments. Obviously, the missed payment will show up on your record, and the new insurance company will charge you more for a policy than it would charge a customer with a strong payment history. In a worse case, if the new insurance company discovers this problem in your record after selling you a policy, the company might cancel your new policy altogether.

Grace Period

When the insurance company gives a due date, it implies that they should receive the check by that day and not that you can wait to post the check on that date. Waiting creates a lot of problems, of which you need to be careful. Life and health insurance policies often have grace periods of 30 days mandated by state laws, but this is not the case with auto insurance. Even if your insurance company has accepted late payments in the past, this in no way means that they will accept late payments every time. A regular habit of paying late can cause several problems. And even if the next time is the first time that you will be late in paying your insurance, the insurance company has the right to cancel the policy immediately and not renew it at all. If you buy the policy again, the premium charged will be exorbitantly high.

New Insurance

When the insurance company cancels your insurance for a late payment, you might think that there is no dearth of insurance providers in the market and that you will go to another company to buy a new policy. This is not necessarily the case because when you go to a new company, they will know that your policy was canceled on the basis of late payment. This can cause them to reject your application for insurance. Prices are affected by credit history, which can also pose problems with a new insurance policy, as mentioned above.

Final Word

The consequences of paying insurance late can be long lasting. Your overall credit history gets affected, which can severely impede your ability to secure loans and credit cards. The best thing to do is to make payments on time so that you never need to face the consequences of making a late payment.

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