Missing monthly payments can make getting insurance difficult in the future
Managing your personal finances and paying your bills on time is truly a balancing act. While missing the due date for your credit card payments will result in late fees and potential damage to your credit rating, missing an insurance payment could have an even larger financial impact than just a month’s premium.
There is a difference between a non-payment (missing a payment) and having your insurance cancelled because of non-payments. If you are late making a payment it may not affect your coverage. But your insurance policy could be cancelled if you have multiple missed payments.
Once your insurance policy is cancelled due to non-payment, securing new coverage is not as easy as finding a new cell phone carrier. It can have a negative impact on your current and future situation. Here are six important things to understand before you consider missing a payment:
- No coverage. If your insurance is cancelled, you will no longer have coverage to protect your home or car. Remember that it is illegal to drive without coverage.
- Limited acceptance. Cancellation due to non-payment may affect whether or not an insurance company will take you on as a customer.
- Increased premiums. If your insurance policy is cancelled for non-payment, it may impact your premium. You may have limited options available if insurance companies decide they do not want to take the risk to cover you. In fact, in some cases, non-payment actually has more of an impact on premiums than making a claim.
- A record. Having your insurance cancelled due to a non-payment stays on your record for three years. So if you try to secure insurance elsewhere during this time, it will be on your record.
- More fees. You will have to pay non-sufficient funds (NSF) charges from the insurance company and your bank.
- Bad credit rating. Having your insurance policy cancelled for non-payment also negatively impacts your credit rating because the outstanding charges may be taken to collections.
Insurance coverage is one of the most important expenses to account for in your budget. Here are a few tips to help ensure you have manageable payments:
- One option is to pay the annual premium fee with a credit card. Avoid the monthly finance fees and earn points on your credit card.
- Get multiple quotes. When your insurance comes due, shop around for the best rate and coverage.
- Increase your deductible to reduce premiums.
- Find out how much your insurance is going to cost before buying a car. That way you know ahead of time how much to budget for the car and insurance payments.
Insurance protects your most valuable assets. It’s important to weigh all the factors that could end up costing you more in the long run.