Some businesses might be familiar with the Notice of Cancellation for non-payment of premium. By statute, before a company ends coverage for any reason, proper notice must be submitted to the insured and these notices are the company fulfilling that obligation.
Keep in mind, insurance contracts, in the simplest form, are promises. The insurance company promises to pay claims for the coverage the policy intends - and the insured promises to pay premiums. When the later does not occur, the former is forced to cancel their promise within the rules of the State.
The notice indicates that you have been cancelled effective by a certain date. Yes, you can pay the bill and get a reinstatement of the policy. Sometimes. However, there is more to this than simply paying late. Insurance companies look at this process differently than simply being late on a payment - especially if it's consistent.
Some companies will refuse to reinstate the policy after a number of cancellations. Poor track records in payment history can show an insured has a higher likelihood to have claims. The cost of executing the process of cancellation and reinstatement is not trivial.
When you apply for insurance, there is a standard question about whether the applicant had been cancelled or any reason in the past 3 years. This question can affect your acceptance at a new company, or it can affect rates once accepted. Having a bad payment history can keep agents from getting credits approved and many companies provide a discount for good payment history. Most times, insureds are doing themselves a disservice by allowing their policies to go into cancellation status.
There are things you can do to avoid this:
- Utilize automatic payment mechanisms to EFT draft or Credit Cards. Some people have trust issues with automatic systems; however you can make the automatic payments happen through your bank utilizing billpay systems.
- When available, change the payment date to make it easier with cash flow or other bill payments.
- If utilizing the US Mail to carry checks, make the payment 2 weeks out. We have seen large delays in checks being received after they are mailed resulting in notices.
- Utilize electronic delivery of billing documents – much the same way that checks are taking a long time to arrive – so are invoices.
- Some companies offer significant discounts for paying annually in full – take advantage of that where you can!
The better an insured fulfills their promise to pay for premiums, the easier it is to keep insurance rates lower. If you need help with how to streamline billing, talk to your agent.
Ken Wilcox
Commercial Account Executive