Insurance canceled policy after failed auto draft payment

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Things to Remember...
  • The internet and new processing features of banks have provided convenient ways to pay your bills
  • Sometimes, however, automatic withdrawals are not processed correctly, either through customer or bank error
  • Double check all your information when setting up automatic payments to ensure you do not miss a payment

Auto insurance companies may give you the option to have your payment deducted automatically for your convenience, and theirs.

Unfortunately, sometimes automatic withdrawals don’t go through the system correctly.

If your auto insurance payment was not deducted from your bank account, it may not be a result of a failure on the part of the auto insurance company.

If you don’t have enough money in your account, your bank may have returned the payment. You will need to check with your bank and their policies regarding automated clearinghouse or ACH payments.

You will also need to check with the auto insurance company to see what day they have scheduled to withdraw the money from your bank account.

If you have a direct deposit coming at midnight, it is considered the next business day. If there aren’t enough funds to cover the auto insurance bill the day it is sent through, the bank could return that payment.

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How is the automatic payment set up?

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New bank processing features and the convenience of the Internet have made it increasingly easy to schedule all of your bills to come out regularly.

If you do this with a large number of your bills, it can make it difficult to track exactly how each payment is scheduled to go out.

Many banks have a service called bill pay. The bill pay feature means that the bank takes the initiative to send out the payment request every month, bi-weekly, or one-time at your request.

Many companies also have the option to have the automatic or ACH payment scheduled directly through their company.

If you have problems with any of your payments, including your auto insurance, you will have to determine the method the payment is being made.

If the auto insurance company is initiating the payment, they may be able to correct the issue. You will have to check to see if you had enough money in your bank account to cover the payment.

Ideally, you maintain enough funds at least a day or two prior to the day in which the funds were to have been withdrawn from your account.

Another problem you need to check for is if the auto insurance company has your correct account and routing number.

This is generally only a problem for the first scheduled automatic withdrawal for your auto insurance bill.

You may have given the correct information from your bank. If the insurance company input the information incorrectly, the payment will not come out of your bank account.

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What can I do to correct the cancellation of my auto insurance?

The first thing you need to do is diagnose the problem. Your auto insurance company should not be canceling your policy for non-payment if it was their responsibility to deduct the payment from your bank account.

They may have the wrong account information, you didn’t have enough funds in your account, or your bank had a processing issue that day.

Double check your account information with your bank. Some people or companies will drop a zero or series of zeroes off the front of the account number.

Depending on the bank, these zeroes may be necessary for this to read as a valid account number.

Track all of your automatic withdrawals. Know the amount, the company, the date and the method. Use a calendar or a weekly planner to keep track of when these payments should be deducted from your account.

Check with your bank and/or insurance company if there is a payment that hasn’t been deducted as scheduled. Weekends and holidays may play a role.

Understand the policies for ACH payments through your insurance company for non-business days. Check with your bank to see when these payments will be processed.

While there is no reason the auto insurance company should cancel your policy if it is their responsibility to draft the payment from your account, it is still your responsibility to make sure the payment is made.

Keep organized with the details, and follow up with the insurance company to make sure everything is in order.

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