Let’s say that you don’t use up your auto insurance premiums because you are changing insurance companies. If this is the case, the insurance company that you switch from will pay the full amount of unused money that remained on your balance. Generally you need to have already fully cancelled your policy in order to qualify for the refunds though. As with any business, mistakes are made and from time to time, insurance companies forget to grant their customers the refunds that they deserve from unused premiums.
Most people are well aware of the fact that not all insurance companies are highly compliant and put the customer first. However, most mainstream insurers will want to refund you the full amount that you deserve so that they don’t get complaints or bad consumer reviews. Due to the fact that most insurers require their customers to make an initial down payment (i.e. deposit) before starting their coverage terms, you may have money left-over in your “premiums” balance before you switch companies.
How to Calculate: Unused Car Insurance Premiums
Most insurance companies mandate that you pay a full month in advance on your premiums. So if you were looking to get coverage for October 2012, you would have already had to make an initial payment in September 2012. Let’s say that your monthly rate is $85 and you have already paid up for the month of October.
In the meantime, let’s say that you decided to cancel your policy on September 14 (almost halfway through the month) and decide to switch car insurance companies. Since you are paying roughly $85 per month and there are a total of 31 days in October, your average daily cost would be $2.74. If you cancelled on the 14th of September, you should get a refund for the remaining days in September as well as for the full month of October.
If you calculate it out, you should come up with 16 days in September and 31 in October that you’ve already paid for. If you do the math taking 47 days total and multiplying by $2.74, you should come up with a total of $128.78 for a refund on your premiums. This is money that you’ll likely want back as soon as possible so that you can finance payments with your new insurer.
How long will it take before I get the full refund for my unused premiums?
In short, it completely depends on the state that you live in. Different states have different insurance laws that your old insurer must follow. If the state law says that they have up to 45 days to pay you following closure of your account, then they must follow through. If they are late, they can get into legal trouble.
Since most insurance companies are professional and don’t want to get themselves into legal trouble, they will generally pay their customers on a timely basis. If you don’t receive a refund within 30 days of closing your account, I would start to get suspicious. If you opted for paperless billing on your insurance statements, they may send the money directly to your bank account – so be sure to check your balance for any added funds following your insurance policy cancellation.
What if my insurance company didn’t refund my money?
If your insurance company hasn’t refunded your unused money, one way of finding out what you deserve to be refunded is to call them directly and ask questions. I know it may seem like you shouldn’t have to call your old insurer, but sometimes you need to be proactive and ask them whether they have issued a refund. Most people that haven’t received a physical check will likely find out that the money has been sent via direct deposit into their checking account.
If you are 100% positive that your cancellation has been processed and that you haven’t received a refund after the designated time period, there’s definitely a problem. I would suggest calling them once again and talking about it via phone. If you don’t want to call them, you can always write them an authorized legal letter notifying them that they failed to make their payment on time.
Insurance company complaints
If you are fed up with the way everything has been handled, you can always file a formal complaint. Generally most people contact the BBB (Better Business Bureau), but you could consider writing a review of the company online to share your experience as well. Most companies hate complaints because their reputation goes down in terms of customer service.
For people that paid a good chunk of change for a policy and haven’t gotten the proper refund, filing a complaint may also be a good way to go.
Beware of Hidden Cancellation Fees
It may sound ridiculous, but certain insurance companies may actually charge customers to cancel their policy. If you agree to a certain contract length and then decide to cancel early, you may get charged for it. In general, it is completely legal for an insurance company to charge you for cancelling your policy earlier than what was agreed upon. In their terms of service, they likely discuss the fact that you may be subject to extra fees upon termination or cancellation of a policy.
Most insurance companies do not charge people for cancelling because they don’t want to run the risk of having a lot of complaints filed against them. Most companies charge under $50 to cancel a policy early – but there are definitely some that may charge more. The reason that they charge is to: A) Keep customer turnover rates low and B) Collect money for deleting your information from their database.
When in doubt: Always contact your insurer
If you feel like you deserve money that hasn’t been refunded, contact your insurance company and ask questions. Most companies are actually pretty darn honest and will tell you whether you owed any cancellation fees and/or when your refund will arrive. Hopefully you are able to collect the money that you deserve and don’t have to wait super long for it to arrive.
If you want to find a good new insurance company to work with, be sure to enter your zip code into the form at the top of the page for a free quote comparison. The quotes are tailored to your area and will help you find a reliable insurance company to work with.