Your guide to understanding the serious financial and personal implications of making insurers wait.

Key takeaways:

  • Understand how timely payments maintain insurance coverage.
  • Learn how late payments can affect your policy and financial stability.
  • Get practical tips to stay on track with your payments.

Saying “paying your insurance premiums on time matters” might seem obvious. Put it this way: it matters more than you might think!

Some policyholders might regard premium payments as just another bill, but there’s a big difference between jeopardizing your insurance coverage and being tardy with paying utilities. Let’s spotlight the financial implications of late payments, and how they can affect insurance companies and customers.

Insurance payments and mutual trust

Insurance requires mutual trust. The customer trusts the insurer to provide support when needed, and the company believes the customer will make payments on time. That’s why it’s easy to picture an irate customer feeling betrayed if their provider isn’t paying out when it should. Trust was broken. Few see the insurer’s side.

Carriers rely on their customers, too. Late premiums hurt the insurer’s financial profile, and their ability to pay customer claims and make investments in the wider economy. That’s why mutual good faith that both sides uphold the contract is so vital.

Insurance companies and late payments

Insurers offer grace periods during which they continue to cover the customer, even if premium payments are late, effectively briefly providing “free” insurance. This is another good faith move from the insurer who believes the customer will provide payment.

Do you know how long your carrier’s grace period is, or if this even applies to your particular coverage? Our earlier blog goes into more details about grace periods and three major coverage types (life, vehicle, and homeowner). We highlight the serious risk of late payment for vehicle and homeowner coverage since these two rarely have a grace period while providing our advice on keeping to due dates.

Misunderstanding grace periods is not a gap you want in your insurance knowledge. Carriers are taking a harder stance against non-paying customers, which may have serious consequences on the customer’s insurance profile and overall quality of life. 

Consequences of missing payments

Here’s where we need to get real. Grace periods and other buffers are never something you should take for granted, because things can turn for the worse very quickly if you fail to pay your premium. 

At best, a customer will leverage their grace period then provide payment (albeit with a probable late fee). On the other hand, a carrier could impose a waiting period before reinstatement (leaving you vulnerable in the interim) and/or increase your premium(s) upon reinstatement.

Today’s insurance carriers have very low tolerance for late payments and terminate policies quickly. Anyone who presents a less-than-perfect insurance profile may quickly find themselves subject to insurers seeking ways to end policies from nonpayers to cut their liabilities.

Now, grace periods are required by law, which dictates insurers only terminate a certain percentage of late payments. The rest must be for valid underwriting reasons at the time of renewal. You don’t want your policy to be part of that “certain percentage.”

Jettisoning customers for nonpayment is one of the few ways insurers can reduce New York policyholders. Fraud is one cause for canceling policies, but it’s not very common and hard to prove. Therefore, carriers look for cancellation reasons they can easily justify, so they target late payers.

Insurers’ perspective and further consequences

There’s a strong correlation between late payers and high-risk drivers to insurers. Carelessness with following payment schedules is no different than being reckless on the road. Neither party is taking the necessary steps to protect themselves.

It’s not a comparison you want your insurer to make. Nonpayments after grace periods lapse can cause an insurance lapse that, once your current carrier drops you, can make it extremely difficult to find another provider willing to insure you. Even if you can, don’t expect rates like those your last insurer gave. You can expect to pay at least twice as much for the replacement policy.

You could also see your credit score impacted by late premium payments. Insurers are increasingly studying it when dealing with potential and current policyholders, not to mention many other transactions where your credit score can influence access to mortgages, auto loans, and credit cards. 

Improving and managing your credit can be intimidating. Here are some expert tips to keep this part of your life tidy including examining your credit score, limiting your open accounts, and making credit payments on time.

Tips for keeping up with payments

Automatic payments eliminate the possibility of memory lapses. Of course, you must remember to monitor your bank account to ensure funds are sufficient to pay premiums. Otherwise, you’ll be guilty of nonpayment or face overdraft charges.

Another option is to pay the entire year’s insurance in a lump sum once or twice a year. This is certainly a significant financial outlay, but if it’s something you can afford, you’ll gain peace of mind that there is less chance of missed payment dates.

You may be able to negotiate your monthly pay date, arranging a time when you’re in a stronger financial position and more able to comfortably meet premiums. Alternatively, consider reducing your level of coverage, lowering monthly premiums and potentially making them easier to pay.

Make sure you at least have billing reminders in place! Advance notifications to digital devices can help you meet payment dates. What if you simply can’t make that month’s payment? This is when it’s essential to communicate with your insurer.

This at least shows them you care. Discuss your options with them and how you can best proceed without negatively affecting yourself as an insurance prospect. A little communication can go a long way in preventing undesirable outcomes.

The value of timely payments

At NICRIS Insurance, we want insurance to be simple for everyone. This starts with seeing timely payments as part of smart financial planning. Our expert team can help you make those plans, giving you greater financial stability while empowering you to take control of your future.

You can learn more about our dedicated team, then send a message or get in touch today for an instant quote on car, motorcycle, home, renter’s, or term life coverage.