Can Missing a Monthly Payment Affect My Insurance Rates?

Late payment

Missed payments are not in and of themselves a rating factor for insurance, but if you fall behind by more than a month, that could lead to you being cancelled, and that will definitely affect your future insurance rates.

Sometimes in life, you can hit a rough patch, lose your job, need to take a leave due to an injury or illness or because a loved one is sick and you need to take care of them. You can also find yourself with higher than expected expenses in a given month. Maybe you had a big expenditure like a vacation, or needed to replace your roof. It’s not unusual to find yourself short of money from time to time, and sometimes that can mean missing an insurance payment.

Hey, it happens. If you’re late on a payment, or your insurer tries to withdraw funds from your account and there’s not enough money in there to cover your monthly installment, it’s not the end of the world. Depending on your bank, they may charge you an NSF fee. As for your insurer, they should notify you if you are late on a payment. If that happens, it’s very important that you take it very seriously, and take steps right away to rectify the situation.

What Happens if I Ignore a Late Payment Notification?

When your insurer notifies you that your payment is late, they will provide instructions on how to make a payment, and a deadline, usually between two weeks to a month from the original payment date. Don’t ignore the deadline. If you miss it, then your insurer can cancel your policy for non-payment. If your insurer decides to cancel your coverage, they are required to send you a warning by registered mail, and give you 15 days to pay. If those 15 days come and go and your coverage is cancelled, that is a permanent mark on your insurance record, and means that you will be considered a high-risk driver by most insurers. Even if there’s not much of a gap in your insurance, your rates could triple and might not come down for many years afterward.

Missed Payment on Car Insurance

If your vehicle is leased or financed (learn about the benefits of each), it can be repossessed by the lessor/lienholder if the insurance is cancelled and not replaced with a new policy. Insurance is a condition of the finance/lease agreement.

Does Not Paying Your Insurance Affect Credit?

After a policy cancels for non-payment there is usually a balance left outstanding. The cancellation goes on your record even if the balance gets paid at a later date.

Insurance companies usually try once (maybe twice) to collect the outstanding balance and if not received, it goes to collections. This can affect your credit.

How to Avoid Missing Payments

The best strategy is to always make your payments on time. If you think that there’s a chance that you could miss a payment, try one of the following to keep your payments up-to-date and your insurance record clean:

  1. Pay your premium in full at the start of the policy. If you have the money, why leave it to chance?
  2. Set up automatic withdrawals from your account. Then you don’t need to remember to make a payment. But this doesn’t help you if for some reason you run low on cash one month.
  3. If you know you can’t make a payment on time, call your broker or insurer. The fact is that most insurers will work with you to make arrangements if you let them know that you’re having trouble with a payment. There may be additional fees or penalties, but nothing compared to the cost of being cancelled.

Perhaps the best way to avoid missing insurance payments is to shop around for a monthly insurance rate that is easier on your pocketbook. Mitchell & Whale works with 40+ different insurance companies, so if you call us, it’s likely we’ll be able to find you a great rate that fits within your budget.

Ask Adam - Can missing a payment affect my insurance rates?

Adam clarifies when missing a monthly premium payment can lead to an increase in your future premiums.

Video Transcript

Al:
If I miss a monthly premium payment can that affect my rates next year?
Adam:
Yeah, the direct answer is if you miss a payment, it can affect your rates. Now missing your payment and making it up within the alloted time you're allowed to make it up—most all companies give you a little leeway before the policy cancels. There's 15 days from when you first missed it to when you have to make it up inside there. But if you don't make it up and your policy actually cancels, having your policy cancel for non-payment is a ratable offense and it'll affect which companies you qualify for. So if you have a perfect payment record, you could maybe qualify for 30 to 40 insurance companies and if you have a cancellation for non-payment you might cut that list in half, and if you have a second cancellation for non-payment, you're probably down to two insurance companies in Canada that are willing and able to write your business.


5 Comments

  1. Avatar
    Vox-Reply
    March 16, 2020 at 7:26 am

    If you pay an adjustment after the end of the year under a special arrangement you’ll not be charged late payment penalties, as long as you keep to the terms of the arrangement.

    • Mitchell & Whale Team
      March 17, 2020 at 4:36 am

      It’s fortunate that you were able to make this arrangement with your insurer, but not every insurer offers this option.

  2. Avatar
    Med Advice-Reply
    April 23, 2020 at 10:39 am

    You could choose to take out Payment Protection Insurance (PPI), which may cover your repayments if you lose your job, become ill or die. However, you should check the details carefully first, to ensure it’ll meet your needs

  3. Avatar
    Daysis-Reply
    April 23, 2020 at 8:18 pm

    Some companies take late payments into account when calculating your score. This is because overdue payments can suggest you’re struggling to manage your finances. As a result, you might not meet some companies lending criteria.

  4. Avatar
    Lady-Reply
    April 24, 2020 at 9:24 pm

    Some companies take late payments into account when calculating your score. This is because overdue payments can suggest you’re struggling to manage your finances. As a result, you might not meet some companies lending criteria.

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