Thursday, July 14, 2011

What do I need to know before I cancel my policy?

If you have an insurance policy of any kind and are thinking of canceling it for any reason, think about the following:

1. Am I replacing the policy? If you are just switching carriers, look at the new policy that you are switching to. Does it provide the same or better coverage limits? What is the cost difference? I've seen people cancel a policy, go to a new carrier, pay $30 less a year and loose $80,000 in coverage. Think about it before you act.

2.  If you are canceling the policy and not replacing it, think again! You are required to have minimum auto coverage for your state. Here in California and elsewhere, the carrier is required to notify the Dept. of Motor Vehicles of any changes in your policy. If you do not have coverage, you could have your vehicle registration suspended. If you have a loan on the property, the lender will usually require you to have insurance on it for the life of the loan. They can force place coverage to protect themselves (Tell Me More).

3. When will my new coverage take effect? If you cancel your insurance today and your new policy does not go into effect for 2 days, and something happens tomorrow, you could be stuck without any coverage. I hope you have one honey of a savings next egg built up.

4. Do I get a refund? In some cases you could be canceling your policy during the current coverage term (mid-term cancellation is what it's called). Your carrier will then owe you a refund for any paid but unused premium. Most carriers pro-rate your refund based on how many days you were covered under the policy, how many days are left in the policy term and any fees due to the carrier. If you are pretty close to your renewal date, you may want to wait.  Refund policies and calculation methods vary carrier to carrier, so you may want to check with your carrier.  

5. Have you been with the same carrier or agent for years? Call your agent and ask them if there are any other carriers that may have appropriate coverage. Some carriers will let your agent cancel the current policy and re-write it, which can also lower costs.

Keep in mind that insurance is a way to begin to rebuild your life after a loss. It's not there to make you rich, pay for simple repairs, or to make your life more difficult (although I do wonder on that last bit!) . It's a way to have access to money that you may not normally have in an emergency.
                              

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