Want to hear a secret way to keep your insurance premiums down? Pay your insurance premiums by the due date. Late payments cost the insurance carrier money, which is then passed on to the consumer in the form of higher insurance premiums. With the availability of sophisticated data analysis, companies can now identify their customers that are less profitable and charge only those clients higher premiums. Those with a history of late payments may discover their insurance company will not accept their payment after the due date and find themselves looking for another carrier. That company may charge higher rates based solely on the previous payment history. Carriers claim that statistically those drivers that routinely pay late are more likely to have an accident.
The worst case scenario involved with paying your premium late is having a claim during the time your coverage is not in place. Although many do, insurance companies are not generally required to offer a grace period particularly at the time of renewal. To insure continuous coverage without lapse, your payment should reach the carrier before the renewal date. Even if your company elects to accept your late payment, the cost can be significantly higher. Late fees and cancellation charges can increase the cost by hundreds of dollars a year.
Most insurance companies have dozens of plans or tiers all with different rates. The plan with the lowest rate, of course, is offered only to policyholders least likely to have a loss. If you routinely pay your premium late, you may see your premium increase even if you have not had a claim! Policyholders with late payment habits generally do not qualify for the best pricing.
Most companies offer a variety of options designed to help their client make timely payments. Phone payments, online payments or autopay options tied to your checking account or credit card help to make paying your insurance a little less painful – and maybe you can fly someplace warm with the points you earned paying it on time with your credit card!