If you’re considering changing auto insurance companies, you might also be wondering if you’re entitled to a refund from your current provider. The answer to that question depends largely on the total cost of your policy, how much you’ve already paid into it, and whether the policy has a 6 or12-month term. There may also be some policies in place regarding early cancellation and fees that might apply.
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Most states do have auto insurance laws in place preventing car insurance companies for charging drivers for coverage not provided. And most insurance companies are honorable enough to issue refunds where they are due. But to cover administrative costs and the filing of state paperwork, some companies may charge you a fee for canceling your insurance policy early. If you are entitled to a refund that fee might be deducted from it.
What if I’m only in the second month of a six-month policy?
The biggest factor in determining whether or not you’re entitled to a refund is how long, and how much, you’ve already paid into a policy. If you paid the entire amount up front, you would be entitled to a refund if you switched insurance companies in the second month of your policy. The insurance company would refund you four month’s worth of coverage, minus any fees that might apply. So a policy that cost you $600 semi-annually would result in a $400 refund, less any fees.
On the other hand, if you’re the type of driver that pays for your insurance monthly or bi-monthly, you may not get a refund. In some cases you may even owe your insurance company for any past days of coverage you have not already paid for. As an interesting side note, many times policies that allow monthly payments also include cancellation fees to discourage drivers from frequently changing insurance companies.
How do I get my refund?
If you are entitled to a refund your insurance agent or company will inform you of that at the time of cancellation. In this case it’s better to take care of cancellation over the phone so that you can verify whether or not you’re entitled to a refund. If you are, the representative should be able to explain to you how much the refund will be, what that refund covers, and how long you can expect for it to take before you receive it.
One of the most common ways auto insurance companies issue refunds is to credit you in the same way you paid for your policy. So, if you paid for your policy with a written check, they will most likely issue you a refund check in return. If you made your payment with a credit or debit card, the insurance company will often simply issue a reverse transaction, thereby creating a credit on your card. The insurance company will never issue a refund in cash, just in case you’re wondering.
What if I disagree with my refund amount?
State law allows for some recourse when customers disagree with actions taken by their insurance companies. However, be advised that laws differ from one state to the next. There are some states with a dedicated arm of the government directly overseeing the insurance industry. In many of these states there are mechanisms in place where customers can appeal to that governing body for relief from their insurance company. The insurance company then must defend their actions to the government body.
Other states do not offer such redress, but that doesn’t mean all is lost. In these types of cases it’s entirely possible to go to small claims court in order to get relief from your insurance company. Depending on the monetary size of the dispute, this may or may not be worth your while. Nonetheless, it is an option.
In any case, before you seek legal redress in a disagreement over refund, your best bet to contact your insurance company’s senior management first. That might mean a letter to the CEO or other high-ranking official to plead your case. Often times such high ranking management personnel would rather keep you happy than argue with you, because they want to protect their name and reputation. If you decide to go this route just remember to be polite and honest.
If your disagreement with the insurance company is over how long it will take to receive your refund, that’s a different matter altogether. Unfortunately, it’s something you have no control over unless it becomes unreasonable.
In other words, if it takes 30 to 60 days for your insurance company’s accounting purposes, that’s just the way it is. Your only recourse would be if it’s extended out by several months with no end in sight. Such a circumstance would be sufficient grounds for small claims court.
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