Is Their A Grace Period?

I am always amazed at how clients assume that there is some magical grace period that allows them to pay their insurance payment after the due date.   I’m not sure exactly where the terminology comes from but I think I have an idea where the concept arose. 

In Pennsylvania, the insurance company is not allowed by law to just cancel your policy the day after it is due.  They must follow procedure and give you 30 days notice.  Since the companies do not want to rush to upset clients who just paid a day or two late and since it does take some time to get the accounting department to process and proceed with the cancellation notice, it usual takes from ten to fifteen days before the company actually mails out the cancellation notice.  So, if your policy is due on the 5^th of the month and you don’t pay the bill on time, then somewhere around the 15^th of the month, the insurance company will send out a notice of cancellation on your policy.  This notifies you that if your money is not received by a certain date (here is the legal notice time frame), then your coverage under that policy will cease.

I think this notice period is what has led some people to believe that there is a “grace period” which allows them to pay their premiums after the due date.  However, there is no grace period, the insurance company can to a long time customer in good standing, extend a period of time for the payment, but they are under no legal obligation to do so. Relying on this “grace period” can be very dangerous for several reasons.   

·          First of all, the insurance company doesn’t have to accept your money after the due date and they can let the cancellation stand.  If you have had a loss during this time, you might very well be responsible for the entire damage amount out of your own pocket, not to mention the fines that Pennsylvania levies for not carrying current insurance coverage.  The last thing you want to hear after an accident is that your insurance company won’t pay the bill since you paid your bill late.

·          Secondly, insurance companies are getting tired of being collection agencies.  Therefore, like the banks, they are charging hefty fees for payments that are late.  Some companies charge as much as $35 to reinstate your policy after a cancellation notice has been issued.  So if you are having some cash flow issues and think you might want to pay your insurance bill a little late, be sure that you understand all of the late penalties and fees that will apply.  I would highly recommend that you  prioritize the insurance bill closer to the top of the pile.

The best way to avoid these problems, and even paying the bill altogether is to simply have it automatically withdrawn monthly from your checking or savings account.  Many companies now welcome this payment option since they are always guaranteed their payment on the due date and it saves them from physically mailing you out a bill.  Of course this will fail if there is not enough money in the account to pay the bill, but for protection from forgetting or misplacing an insurance bill, this one could save you a lot of money. 

At Groninger Insurance Agency we try and make this option available to all of our clients who might be interested.   If you would like to know more about the specific fees your company charges for late payments, or if you would like to have your policy set up on bank draft, please call our office or visit us on the web at www.groningerinsurance.com.