May 14, 2011

The Dangers Of Automatically Renewing Car Insurance Coverage

If you have automatic renewal for your car insurance, there is reason to be sure you are fully informed about the process. Tales of policyholders expecting their car insurance renewal to proceed without a hitch are abundant and too costly.

Automatic renewal has some advantages. The main one being that it eliminates having to sign a new contract with a company you feel best suits your needs. The insurer's chief advantage is that policyholders with automatic renewal often don't go to the trouble of looking for a new company.

Insurance companies supposedly alert policyholders that their car insurance renewal is due in about a month. That isn't always the case. Some insurance companies don't notify policyholders about renewals. The first time a client knows his policy has been renewed is when he gets a congratulatory notice, and the new bill.

Policyholders have had unpleasant financial experiences with automatic renewals. If the insurance company has access to a client's banking account or credit card number, payments could be made without the individual's knowledge. That can get ugly if the policyholder hasn't made sure other financial commitments aren't compromised because the insurer took the client's available funds. Also, if a client changes credit cards or banks, and the insurance company proceeds with automatic renewal before informing the policyholder, it could result in a default that shows on your credit record. That might hinder your chances of obtaining car insurance from other companies.

Insurance companies favor automatic renewal because it helps with client retention. Relying on policyholders to simply ride with the tide and not worry about renewals is one business tool insurance companies use to help keep the bottom line solidly black. But even the best money-making plans aren't always foolproof. One insurance company experienced a computer system error that caused many clients who thought their policies were renewed to have no coverage at all. Imagine having to explain that to a traffic cop, or a judge overseeing an accident case. Don't expect anything regarding car insurance renewal to be a done deal. Contact your insurance agent and make sure your renewal is exactly as scheduled. The consequences of not keeping tabs on your policy can be too expensive to ignore.

If you do decide to go with another insurance company, demand that your former insurer send a notice stating your financial obligation to them quits on a specific date. It is on that date your new policy goes into effect. Don't let the old company ignore your demand. It's a small thing to do so you won't wind up paying for two policies.