When you buy an insurance policy you sign a contract and it usually includes terms of payment as well. You have to keep your end of the bargain to keep your policy going. If you don’t pay the premiums you cannot expect the insurer to compensate your losses when you have a claim. It is a simple system that has been operated for years.
So, what really happens if you are late on your payments? This depends on the practice followed by your insurer, stated in your policy or imposed upon by the state you live in. As a general rule your coverage can be cancelled when the payment doesn’t arrive in due date. Some companies may allow you to get back on cover once you pay the money and others may require you to get a new quote that may be more expensive.
However, some companies may offer a grace period of about two weeks and sometimes up to a month to pay the arrears. They may however charge you additional fees for late payment processing. If they have stated in the policy documents that they will offer you this period it is great for you. But it should never be abused by being constantly late. They can refuse to offer you installment option from next renewal if you are constantly late.
If you don’t have this provision in your policy documents you should assume that your coverage will be cancelled or left to the mercy of the provider once you are late. Some state authorities may require companies to offer some sort of grace period after a payment missed as well. Then companies need to follow those guidelines.
There is another way of making sure that you don’t miss your payment. A new company in the name of BillFloat from San Francisco offer their customers an open credit for payments of their due bills. But they only offer this for small amounts. In practice you tell them about your bill, when it is due and to whom and they will pay it for you in the due date and they will allow you another 30 days to pay the money back to them.
This may be seen a great facility when you are short only couple of hundred dollars. They make sure that you don’t miss your payment and your credit score gets protected. You will then have time to deal with the situation and make your account good with the company in 30 days. You are allowed to pay them back whenever you want within this period.
It all looks great but I am sure you have already seen the similarities with pay day loans. The service is not free and you will need to pay them interest the same way as the payday loans. It may still be alright if you are able to settle the debt within the short time you are given. What happens if you cannot pay it back in time? Are you going to carry on with the same cycle over and over and pay a small fortune in the process for the fees and interest?