What Does Non-Payment on Auto Insurance Affect?
Missing an auto insurance payment not only puts the policy you have at risk, but it also may affect your ability to get auto coverage with other insurers. Sometimes not paying for coverage as agreed leads to higher auto insurance rates and restricted payment options, even if you have a good driving record.
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Policy Cancellation
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Your auto insurer has the right to cancel your policy if you miss a payment. The insurer may not be obligated to reissue your coverage if you eventually offer to make the missed payment, depending on the terms of your policy. Some companies might only reinstate your coverage if you agree to pay a higher rate for it. Most insurers won’t take such drastic actions if your payment is just a few days late, according to Insure.com. However, people who consistently pay late may lose their auto coverage for nonpayment because of previous late payments.
Replacing Coverage
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You adversely affect your ability to get a policy with a competing insurer if your auto coverage is revoked for nonpayment. An auto insurer will check with your last insurer to find out why your previous policy is no longer in effect. Companies that find out you lost coverage for missing a payment may decline your insurance application, and others might only offer you coverage at a high rate.
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Payment Agreements
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Some drivers may lose the privilege of paying for their auto coverage in monthly installments after they have a policy canceled for nonpayment. They may discover that companies are only willing to insure them if they pay for their coverage annually in one lump sum, according to Insure.com. In any case, it’s important to be honest with an insurer and acknowledge that your previous policy was canceled for nonpayment. Your new insurer can cancel your policy again if he investigates your driving and insurance records and finds out you weren’t upfront about why your other policy was revoked.
State Laws
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Your state’s laws may provide some protection if your insurer cancels your auto policy. For example, Massachusetts has a Consumer Bill of Rights for Automobile Insurance that requires insurers to give policyholders written notice of a policy cancellation 20 days before eliminating the coverage. Residents who make a missed payment before the cancellation date can avoid losing their coverage. Your state insurance department would have information on rights residents have regarding auto policies.
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