This chapter will detail fees your insurer may add to your policy. These fees can add significant costs to your personal automobile insurance. Here are some of the fees commonly assessed by automobile insurers:
When you start a new policy with an insurance company, your
company may charge you a portion of your first policy term's
premiums to recoup advertising, administrative, and other costs associated with gaining you as a policyholder.
This charge can be spread out over the first policy term if you are on an installment payment plan.
If you choose to cancel your automobile insurance policy during a policy term, do not expect to get all of your unused premiums back.
Many insurance companies charge fees to policyholders who cancel their policies mid-term.
Depending on your state's insurance laws, your insurance company may be able to charge you for canceling your policy either by assessing a flat fee or returning your unused premiums on a pro-rata basis.
If the insurance company charges a flat fee, you may pay $25 or more for canceling your policy. If it charges on a pro-rata basis, it will calculate the number of days left in your policy term, determine the premiums it would have received for those days if you had not canceled your policy, and deduct 5 or 10 percent of that amount from any refund it owes to you.
Because a pro-rata cancellation fee depends on the number of days left in a policy term, this charge can be quite hefty if you cancel soon after beginning a policy term. If you cancel near the end of your policy term, however, your charge will be fairly low. Of course, if you are near the end of a policy term and want to switch automobile insurance companies, it is best to continue your coverage until the nd of the term and elect not to renew your policy so that you will not e charged.
Similar to an acquisition charge, a policy fee is an amount you pay hen you begin a new policy with an insurance company. The mounts for these fees vary depending on the company you choose, he program in which your insurance company places you, and the ffiliate of an insurance company that underwrites your automobile nsurance policy. Some companies do not charge a policy fee; others
charge fees as high as $50 or more.
Depending on the company you choose to provide your automobile
insurance, you may be required to pay the entire policy fee with your
down payment, or the company may allow you to spread the fee over
the first policy term. Policy fees are not charged to you again when
your policy is renewed for another policy term.
If your insurance company charges a policy fee, you will not be able
to avoid this expense when you start your policy with that company.
The best way to avoid additional policy fees is to keep your policy in
force, and keep it with the same insurance company for as long as
INSTALLMENT OR BILLING FEE
If you pay for your automobile insurance premiums through an
installment plan, such as quarterly or monthly payments, your
insurance company may add a fee to each installment. This fee
covers the company's administrative costs associated with
processing the payments and continuing your policy coverage.
Installment fees vary significantly from company to company. Some
automobile insurance companies may charge only a few dollars;
others may charge $10 or more for each payment made under an
installment plan. A few states limit installment fees to a certain
percentage of the total policy premium or otherwise restrict an
insurer's ability to charge fees for periodic policy payments.
Some insurance companies will waive installment fees or charge
reduced installment fees if you agree to enroll in an Automatic
Clearing House (ACH) payment system. An ACH system
automatically debits your checking or savings account for the amount
of each premium payment when it becomes due. Insurance
companies are willing to reduce or waive fees for policyholders who
enroll in an ACH program because it eliminates much of the
administrative work associated with processing policy payments and
because it makes it much more likely that the insurer will receive
valid, on-time payments for each premium installment.
The easiest way to avoid installment fees is to pay your premium in
full at the beginning of each policy period. If this is not possible, ask
your agent if your insurance company has an ACH program you can
use to reduce or eliminate your installment fees.
If you do not make your policy premium payments by the date shown
on your bill, your insurance company may impose a late fee. Late
fees vary from company to company - some insurance companies
charge as much as $10 or more each time your payment is not
received by the premium due date.
Some companies will give you a grace period, such as two or three
days after your premium is due, during which they will accept your
premium payment without imposing a late fee. A handful of states
restrict the ability of insurance companies to impose late fees on
automobile insurance policies for example, Arizona law currently
requires insurers to consider payments received up to five days after
the premium due date to be timely, so insurance companies cannot
impose late fees on policy premium payments made during this
Naturally, the best way to avoid late fees is to make sure your
premium payments are always received by your insurance company
by the due date on your bill. If you have difficulty remembering to mail
in premium payments, you may want to consider enrolling in an ACH
program if one is offered by your insurer.
NON-SUFFICIENT FUNDS (NSF) FEE
This fee is charged to your policy if the check or other negotiable
instrument you use to pay your premiums is returned by your bank,
credit union, or other financial institution. A non-sufficient funds fee is
charged every time a payment is returned.
Some states limit the amount that an insurance company can charge
for a non-sufficient funds fee to the actual expense incurred by the
company. For example, in a state with this limitation, if a bank
charges an insurance company's account $25 for the presentation of
a check that is returned, the insurer would be able to charge you a
non-sufficient funds fee of only $25. Other states do not place this
limitation on insurers and allow the companies to charge amounts
that reasonably cover bank charges and administrative costs
associated with a dishonored check or other negotiable instrument.
Of course, the easiest way to avoid incurring a non-sufficient funds
fee is to make sure you have the funds in your bank account to cover
your premium payments.
Fees can add a significant amount to your policy premiums. You can
avoid some of these fees by keeping your policy in force, making
payments on time, and paying your entire policy in full. Other fees
may be unavoidable, and you should consider these fees when
determining your automobile insurance budget.