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UPDATED: Mar 13, 2020
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When you create your monthly budget, your goal is to pay all of your bills on time so that you can build your credit and avoid paying late fees. Unfortunately, a lot of things can happen that can affect your ability to pay each and every invoice by the due date. When your car breaks down or you have a medical emergency that takes you away from work, you’re left trying to prioritize your bills so that you make the payments that matter most.
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Auto insurance is one of those bills that you should see as a priority. Some carriers will bill you past due balances but auto insurance carriers won’t. To keep your coverage active, you must pay your premiums before the coverage is afforded and not after the fact. Here’s what you should know about due dates and how long you have to pay:
Understanding the Insuring Agreement
Auto insurance is a contract. When you’re entering into a contractual agreement, it’s important to know what you’re agreeing to do. The insuring agreement says that as long as you make your payments, the insurer promises to make payments on behalf of you when you have a covered loss. While there are other duties, your basic duty is to pay your premiums on time.
When do you have to pay your premiums?
Auto insurance premiums are due when you submit your application for coverage. When you’re starting a new policy, you must submit a minimum payment to let your coverage take effect. After the policy takes effect, you must pay the additional payments by the due date or when your policy renews. When your policy is due depends on the installment plan that you choose.
What installment plans are available?
Every carrier offers different payment plans. While some companies only accept full payments, it’s more common for carriers in today’s marketplace to offer their customers more budget-friendly options. When your premium payments are due depends entirely on the plan you set up at the beginning of the term. Some of the common options include:
- Monthly with an installment fee
- Automatic EFT installments monthly
- 5-month pay plans with a 2-month deposit
- Quarterly payments due once every three months
- Semi-annual payments due once every 6 months
- Annual premiums to pay 12-month policies in full
What day of the month is the payment due?
In most cases, your payments will be due on the same day of the month each time you’re billed. This is very similar to how you’re billed for a pre-paid cell phone or your cable service. It’s not common for carriers to let you choose your due date. For the most part, your payments must be paid by the day of the month that you chose as your effective date.
What is a grace period?
A grace period is a provision that’s written into many financial contracts. When this provision is in the contract, you will get an allotted amount of extra time past your due date to make your payment.
As long as you make your payment before the end of the grace period, you won’t be charged late fees and the policy won’t cancel for non-payment.
Which carriers offer grace periods?
It’s not possible to create a list of auto insurance companies that offer a grace period to their clients. Since the provision is very common, you’ll have to look up the practices with each company to determine if the companies that top your list offer you extra time to pay.
It’s most common for a provider to offer their preferred customers a grace period. Preferred customers pay low rates because they have good driving records and other favorable rating factors. If you’re a high-risk driver who is buying coverage through a sub-standard company with higher rates, you might have a short grace period or no grace period at all.
How long is your grace period?
Grace periods aren’t universal. Some companies offer very short periods to account for weekends and holidays and others offer longer periods. While the grace period can be as little as one day and as long as thirty days, it’s typical for companies to give their clients between 10 and 15 days to make their payment without setting the policy up to cancel.
The Company Is Required to Notify You Before a Company Cancels
Some grace periods are required by law in the Consumer Bill of Rights. When a property and casualty insurer is required to give you notice that your policy is about to cancel, it is like requiring the company to give their policyholders some extra time to pay.
Not all states have a notice of cancellation requirement, but most do. The notice must be sent 10 to 30 days before the policy terminates.
Do you get a grace period when your policy renews?
If your policy is about to renew, the grace period rule is a bit different. Most companies don’t offer a grace period when you’re renewing a policy because you get a notice of renewal very early. The notice is sent 30 to 45 days before the renewal date so the company isn’t required to give time.
If your policy cancels, you need to make sure to purchase insurance as soon as you can for protection. Make sure to use an online comparison tool, enter your vehicle information and licensing information into the tool, and then you can activate a low-priced policy.
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