What should you do if your insurance company canceled your policy after a failed auto-draft payment?

If your automatic payment for car insurance doesn't go through, your car insurance may be canceled. Here's what to do if your car insurance payment was returned by the bank.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Feature Writer Rachel Bodine

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: Jun 10, 2022

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Things to Remember

  • Automatic withdrawals for auto insurance occasionally fail to go through for various reasons
  • You need to act based on the method by which you send automatic payments
  • Ultimately, you have the responsibility of sorting out the problem, though usually insurance companies and banks will work with you

Choosing to have your auto insurance payments deducted automatically is convenient. However, occasionally system glitches or human errors result in your payment not going through. If you have a failed auto-draft payment, your insurance company might cancel your policy.

If this happens, you need to know what to do to reinstate your policy as quickly as possible, because driving without auto insurance is illegal in most states. There are several steps to take to identify the problem, and you need to initiate all of them. Handling this problem is your responsibility, though financial institutions and your insurance company will likely cooperate with you.

What should you do if your car insurance auto-draft payment doesn’t go through?

Make sure you understand how auto insurance payments work to avoid missing a payment. But in the case that you do miss a payment due to a failed automatic payment, there are simple ways to solve the problem. As is the case in many problems, start with the easiest potential solution. Check to see that your information is correct. An incorrect expiration date or another minor issue can affect automatic payments.

Car Insurance Company-Initiated Payments

If your insurance company withdraws your payments directly from your financial account without any action on your part, contact them to make sure they have the correct account, as well as the right name, routing number, and transfer number for your financial institution.

Make sure that whoever took the information about your account did not drop zeros at the beginning of the identifying numbers or make other inputting errors. If your insurance company is responsible for withdrawing your payment, they should not cancel your policy if the mistake is on their end.

Using the Bank’s Bill Pay Feature for Auto Insurance

If you use your financial institution’s automated bill pay feature, make sure you added your car insurance account correctly if your Progressive payment was returned by the bank, or with any other insurance company. This includes your insurance account number and the postal address for your insurance company.

These types of problems generally occur only on the first automatic withdrawal or bill pay transaction. The right details are vital for financial transactions to complete successfully.

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Confirm Your Account Has Sufficient Funds for Your Car Insurance Payment

If your account did not have enough money to pay the automatic draft from your insurance company, your bank or credit union may have refused to pay. If this was the problem, you need to do these things:

  • Confirm with your insurance company the date they withdraw your payment from your account.
  • Automatic payments are also called automated clearinghouse or ACH payments. Check with your financial institution about policies regarding ACH withdrawals.
  • Direct deposits post at midnight, which is considered the next day for business purposes. Make sure you have adequate funds before the withdrawal occurs. 

If you have had an emergency and know that you can’t afford your auto insurance, contact your insurance company and explain the situation. Tell them when you will be able to make the monthly payment. They may be willing to work with you to make a partial payment or give you a one-time delay to keep your policy from being canceled. It may be a good time to look at how much coverage you actually need to pay for.

Make Automatic Payments of Auto Insurance Easier

Keeping track of automatic payments is often more complicated than making them. Because of the convenience of digital payment transactions, multiple types of payments exist. Make sure you understand the exact process used for withdrawing your digital insurance payment:

  • Set limits. Carefully manage the number of automatic monthly payments you set up. If you have too many automated withdrawals, keeping track of them becomes complicated. 
  • Know the method. Be sure you understand how your payments are set up. Is your car insurance company withdrawing them? Is your financial institution sending them on a fixed date? This knowledge helps you keep track of the process. 
  • Schedule wisely. Automated payments only can go through if you have enough money in your account. Contact your insurance company and schedule your monthly payment just after your payday. This step can remove much stress.

Automatic payments are intended to make it easy for you and for your insurance company. If you are having regular trouble making your payment, contact the company about rescheduling its due date to avoid cancellation.

What To Do if Your Bank Returns Your Auto Draft Car Insurance Payment

If you have ever experienced having a payment returned by the bank, you know the sinking feeling that comes with the notice. However, you can sort out this problem. Doing so takes patience and determination, but act quickly and you can manage it. Generally, your insurance company will work with you to re-establish your policy.

Prevention is better than problem-solving. Check your account at least twice weekly to monitor withdrawals and payments. Set up email notices if you have that option so you will know when various payments go out.

If you find a problem, report it immediately to your insurance company as well as to your financial institution. The nature of the payment determines which entity you contact first. Begin by talking to whoever initiates the payment. Keep records of who you speak to and what actions occur each time.

If you notice a payment was missed in your regular account inspections, handle it immediately. If you are able to make the payment, contact your insurance company to pay manually to ensure your policy will continue uninterrupted.

To prevent future pain from having your auto insurance payment returned by the bank, make a budget. Your auto insurance payment is the same each month, so you can easily factor that in with your monthly expenses to avoid unpleasant surprises. If you feel you can’t afford your auto insurance at the moment, there may be other solutions to help you balance your checkbook. Look into ways that you can make your insurance more affordable, such as adding auto insurance discounts.

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Final Thoughts On Canceled Policies After Failed Withdrawals

Automatic payments are convenient — except when they fail. If your automatic payment for your car insurance policy does not go through, you could face the cancellation of your policy. However, staying on top of your financial transactions can help you t prevent problems as well as to detect glitches early. The sooner you spot a missed payment, the easier you can solve the problem and reinstate your policy if it was canceled.

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