by Guest » Sat Oct 23, 2010 08:49 am
I just got an used car within this last month. I also got an auto insurance with 'Pearl Holdings'.
I've taken the insurance for a period of 6 months (with around $116 as my monthly payment). I had to pay a down payment of around $230 (which would cover for two months payment). I effectively have to pay only for 4 months later on and the last 2 months would be free.
Now, to my dilemma . What would happen if I want to cancel my insurance within the first 4 months? Would the company refund the excess amount ?
Looking at it from another perspective :
Let's say I'm not pleased with the company/I can find cheaper quotes with other companies... What if I'm looking to switch my auto insurance company (within the first 4 months)? Would they refund the excess amount then?
Please respond soon coz' I'm due for my first monthly payment in 2 days - and I don't know what to do!
I've taken the insurance for a period of 6 months (with around $116 as my monthly payment). I had to pay a down payment of around $230 (which would cover for two months payment). I effectively have to pay only for 4 months later on and the last 2 months would be free.
Now, to my dilemma . What would happen if I want to cancel my insurance within the first 4 months? Would the company refund the excess amount ?
Looking at it from another perspective :
Let's say I'm not pleased with the company/I can find cheaper quotes with other companies... What if I'm looking to switch my auto insurance company (within the first 4 months)? Would they refund the excess amount then?
Please respond soon coz' I'm due for my first monthly payment in 2 days - and I don't know what to do!
Posted: Sat Oct 23, 2010 10:11 pm Post Subject:
I effectively have to pay only for 4 months later on and the last 2 months would be free.
Oops! A little error in your math there. If you pay a $230 down payment and four more payments of $116, you have paid about 6 months at $116 per month. No free insurance happening here.
If you cancel before the end of the 6 months period and after your fourth of four $116 payments has been made, you will not get a 100% refund of "unearned" premium. You will get a "short rate" refund -- the insurance company will withhold a specified amount of your paid up premium as an administrative expense to close your policy in their bookkeeping system.
Posted: Thu Oct 28, 2010 12:22 pm Post Subject:
You will get a "short rate" refund
I understand why the carrier is supposed hold back a considerable portion of the paid-up premium.
What I don't get so easily is the way of calculating such short-rate refund. Is it gonna get refunded on a pro-rata basis? Or will it fall on a pre-decided slab? I'm sure you guys would be here to clarify my doubts.
Posted: Thu Oct 28, 2010 11:45 pm Post Subject:
The carrier cannot keep a "considerable" portion of the unearned premium. Most states limit the insurer's short-rate cancellation fee to 10% (or less) of the unearned premium.
So, let's say you paid the semi-annual premium all at once, and let's say that the 6-month premium is $600 to keep it easy. You cancel the policy exactly 3 months after inception: The refund is going to be based on the $300 of "unearned" premium. If the carrier keeps the entire 10% that they are entitled to in most states, you will lose 10% of $300, or $30 as the short-rate cancellation penalty and therefore receive a refund of $270.
InsTeacher 8)
Posted: Fri Oct 29, 2010 11:57 am Post Subject:
Some companies, such as 21st Century, have a stated cancellation fee of $50 or $75, and deduct that amount from the unearned premium. You should find a discussion of "cancellation fees" in your policy.
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