December 26, 2011

Understanding Grace Periods When Buying Auto Insurance Coverage

When searching for auto insurance coverage, drivers should pay special attention to whether or not it offers a grace period. While some family car insurance providers offer a grace period of one to 30 days, there is no law that requires them to do so. This means that if a driver is even one day late with his car insurance payment, the policy could be cancelled and he may not be aware of it. If he is involved an accident, he may assume that his auto insurance coverage is in place when it has in fact been cancelled.

Prior to signing the paperwork for a new family car insurance policy, the driver should read it in its entirety to see if there is any mention of a grace period. If the insurance company offers one, the specifics of it should be included in the policy. However, not all insurance companies offer this information upfront, so it is incumbent upon the customer to clarify this expectation before agreeing to accept the insurance.

In order to avoid a situation of lapsed auto insurance coverage, drivers can pre-pay their policies six to 12 months in advance. Insurance companies save money when billing only once or twice a year, and customers can generally use this to their advantage to save on premiums. Since billing is infrequent, the driver just needs to be sure not to forget to pay it again in six to 12 months.

Another billing option for people who can't afford to pay for their policies in advance is to request monthly billing that is deducted automatically from a checking or savings account. The annual cost of the policy is divided into 12 and the same approximate amount is deducted each month. This also saves the insurance company the cost of billing, so it may be willing to pass along some of that savings to the customer. Prior to obtaining or renewing auto insurance coverage, drivers should inquire about all billing options and then select the one that works best with the household budget.

To get auto insurance coverage reinstated after a lapse, the customer will need to bring her account current and may also need to agree to an automated billing plan. If the payment is more than one month past due, the insurance carrier can cancel it at its discretion. When this occurs, the driver needs to reapply for coverage and is not guaranteed of being approved. The late payments may also be reported to the three major credit reporting agencies. In addition, drivers who are caught driving without insurance can face fines and other penalties depending on the laws in the state that issued their driver's license.