Can you get car insurance if you owe another company?

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Things to remember...
  • Anyone who buys auto insurance will be paying for the coverage in advance regardless of their installment plan
  • If you’re paying monthly, you’ll pay for the upcoming month’s coverage before the coverage is actually afforded
  • The only time you’ll owe money is when you make a backdated change and you’re charged the prorated difference
  • If you don’t pay the billed difference or the amount due, you’ll get a notice of nonpayment of premiums
  • When you let your insurance cancel for non-payment, it can affect your premiums and also your deposit


There are a handful of different ways that you can go about paying your auto insurance premiums. It’s nice to pay the entire premium off at once if you have the funds available, but there are other installment options that you can set up to ensure that you can afford to pay the amount due when it’s due. Failing to make even a single payment by the due date can result in fees and policy termination.

Make sure to use our free comparison tool above to make sure you get the best rate for the coverage you need!

There are only a few circumstances where you’ll actually owe an insurance company money after you’ve severed your relationship with them. Typically, even when a policy is canceled for non-payment, you won’t actually owe your old company money.

This is because of the way that premiums are invoiced. It’s only in rare cases that you’ll have an account balance when your account is inactive. Here’s what might happen if you owe another insurer money:

Basics on Insurance Billing

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Knowing the basics of insurance billing can be really helpful when you’re shopping around for coverage. I will help you understand why a certain amount of money is due when you start your coverage, and why the remaining balance is due on certain dates. This will help you budget properly before you enter into any contracts.

The premiums for personal auto insurance aren’t billed the same as charges for things like your TV or Internet. You’re not paying for the coverage that you’ve used in the past each time that you received a bill. Instead, you’re getting invoiced for the portion of your premiums that we’ll cover you through the next month as long as you’re on a monthly billing cycle. Instead of paying in arrears you can pay in advance.

Most Policyholders Won’t Owe Their Past Insurer Money

It’s really easy to dig yourself into a hole when you’re paying for past charges in arrears. When you’re paying your cable bill for the month of November in either December or January it’s easy to watch your balance add up. Especially when the company allows you an added grace period to make your payment.

One of the good things about the way that your insurance invoices work is that you can’t really dig yourself in this deep hole.

You can’t put off paying your insurance bill for one to two months and then be left trying to scrounge up enough money to make the minimum payment due.

This is a common problem other bills but with insurance, you have to pay what’s do when it’s due. That’s why you usually won’t owe your past insurer money even if you end on bad terms.

Are you charged for a grace period?

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A grace period is an amount of time that you have to submit your payment to the company before the contract will officially be terminated. Some companies offer very short grace periods, but even with a grace period, you still have to make payment quickly or the coverage ends.

The most time that a company is going to give you is 30 days. It’s more standard to receive about 10 to 14 days to submit your payment. Giving you time will also give the company time to send you a notice that your policy will be canceled.

In many states, sending out this notice is actually a requirement before the company can legally terminate your coverage. Typically, the coverage that is granted during this time won’t cost you. It’s not normal for a carrier to bill you added premiums when they’ve given you notice that your policy will be canceled for non-payment.

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Owing a Balance After Endorsing the Policy

One way that you might wind up accumulating a balance due with your car insurance provider is when you endorse your policy and you make a backdated change. Backdating a change isn’t very common do you have the right paperwork sometimes the agent is willing to do it.

By making the change in the past you will have a prorated balance due for the added coverage. That means that the insurance company must bill you for that prorated difference during an upcoming billing period.

If you don’t pay that invoice, contains charges for the past, you may wind up owing the company money even after the policy has lapsed.

It’s the Lapse That Affects Your Future Rates

If you signed up for an auto loan and didn’t pay your lender, that information will be found on your credit report. Any future lenders that you wanted to deal with will be able to see that you had a bad payment history with your prior finance company. This is not how it works in the insurance industry.

In the insurance industry your reputation and your insurance history do matter, but not in the same way that those things matter to a creditor. Insurance providers are more interested in knowing whether or not the vehicle owner maintain their insurance. If you had any lapses in coverage, the agent might be concerned. Having an insurance lapse, even it’s only a lapse for a week or two, is enough for the company to offer you a high-risk rate instead of a preferred rate.

How can an insurer verify your insurance history?

Insurance companies use electronic programs to communicate with one another. A lot of times, the company will enter a past clients information into the system and note that their policy canceled on a certain date. If a company runs this report and sees that you have a termination for non-payment, your quote can be adjusted without you even expecting it.

You have the right to buy auto insurance whenever you own a car. As long as you have an active license, there is somewhere for you to buy insurance. Owing money to a company and allowing your policy to cancel can affect your rates. If you’re looking for the best deal possible, some comparison shopping online and use a third-party quoting tool.

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