- Auto insurance is a financial product that you purchase to indemnify yourself if you have a loss. When you enter into an auto insurance contract, you’re agreeing to pay your premiums in exchange for coverage
- Insurance is much different than a loan. To qualify for a loan, you need to show you’re financially responsible. This is why the payments that you make to your insurer aren’t reported to credit bureaus but the payments that you make to your creditor are
- Since auto insurance payments aren’t reported to the credit bureaus, making a late payment to your insurer won’t affect your credit score or your credit history
- It’s never wise to pay premiums late. Some companies don’t offer any type of grace period. If there’s not a grace period, your coverage will cancel as soon as your payment is considered late
- Late payments don’t go on your credit file but terminations for non-payment can go on your insurance history report. Most insurers prefer to do business with drivers who have maintained consistent coverage. If you have lapses, it could affect your premiums in the future
Paying a bill late is never ideal. When you set your budget, the goal is to submit all of your payments on-time so that you can build your credit and avoid late payment fees.
Unfortunately, you can’s control everything in life. An emergency can lead to lost income and unexpected expenses that can affect your ability to cover your bills for months to come.
When you’re trying to juggle your bills on a limited income, you have to prioritize the invoices. Your cable and home phone aren’t quite as important as your electricity and your car note. You should always try and pay the bills that are reported to your credit first.
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When you come across your insurance invoice, you might wonder if paying late will drive your credit score down. Here’s what you should know about insurance and credit:
Is your insurance payment history reported to the credit bureaus?
Not all of the monthly payments that you make to service providers will be reported on your credit. It’s important to differentiate the payments that go on your credit and the payments that don’t. While many consumers think that utility bills, rent, cable, and phone bills are regularly reported, they aren’t.
Insurance premium payments fall into the category of common bills that don’t help you build a good credit score.
While this is upsetting for some, it’s not so upsetting to policyholders who are consistently late making their installment payments to their insurance carrier. Just make sure that you pay your loan and credit card payments on-time.
How will paying your insurance late impact your policy?
You’re not in the clear just because the missed payment isn’t reported on your credit. Your credit may be salvaged but that doesn’t mean that the insurer will approve of your decision to postpone your payment for a few days or weeks.
If the insurer doesn’t allow late payments, your coverage could be terminated as soon as 1 minute past the due date.
Insurance companies aren’t always required to give you a grace period. If the state doesn’t require companies to give their clients a grace period or advance notice of a cancellation in writing, the policy could terminate for non-payment immediately.
The last thing that you want to do is lose your insurance because you were 1 or 2 days late.
If you pay your bill late, will you be charged a late fee?
If the company is nice enough to offer you a few more days or a few more weeks to pay, you can’t forget that missing your payment will cost you. Not only do you have to catch up your premiums, you’ll also likely be charged a late fee on your next month’s invoice, which is still due on its normal due date.
The actual fee for being late depends on the carrier that you’re with. With most companies, the fee is fixed and will range between $15 and $50.
Some companies will charge a late fee based on the number of days that you’re late. This type of fee can add up quickly and make maintaining your coverage with the same carrier difficult.
What happens if your policy cancels because of a missed payment?
If you don’t get a grace period or you let the extra time pass, your insurer will set up a cancellation for non-payment. This is one of the few reasons that your company can terminate your coverage when you are still within your policy period. A termination will lead to at least a small lapse in your insurance coverage.
If you have a lapse in coverage, it can affect your registration status and even your driving privilege.
When someone is caught driving without insurance, they can face misdemeanor charges. Multiple offenses can lead to a loss of your license. In most states, your vehicle registration is suspended once the DMV finds out your coverage lapsed.
Can paying premiums late affect your premiums?
If you miss your payment by just a few days, most companies will reinstate your coverage. You only need to make a payment and the coverage will take effect again. Your premiums won’t change and you won’t have to apply for a new term. This is the easiest option.
When you no longer qualify for coverage or you’ve let your policy lapse for too long, you’ll have to search for insurance elsewhere. When you apply, it’s possible that the insurer will check your C.L.U.E. report. If the lapse is reported, some insurers will charge you a high-risk premium for failing to keep your coverage active.
How does credit affect your insurance?
Credit can impact your insurance rates in most states. Insurers will look at proprietary credit-based insurance scores to determine if a household will file a claim. Those with a lot of debt or a lot of payment defaults will pay a higher premium than people with a better credit history. Not all companies use credit as a rating factor.
Not paying your car insurance can get you in big trouble with law enforcement and the DMV. Make sure you do your best to keep your coverage from lapsing. If your policy has already lapsed, start shopping around for coverage right away.
Find a low-cost option by comparing online quotes instantly and then apply for the best product so that you have protection.
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