One of the most common questions we get from customers is something like this:
I just have my policy revoked – why do I get a bill?
Then we ask “Did you actually cancel the policy? Or did you just not pay the bill? "When we confirm that the customer did not pay the advance and had it canceled for NON-PAYMENT we can assume that the answer to the question is" because you are liable for earned premiums. "
If you are not in the insurance industry, earned premiums are a tough concept to understand. But it is our hope that this article will help you understand it better. If nothing else, it can save a lot of headaches. Because no one wants to get a bill for something you did not want from the beginning. Let's start with a quick definition of earned premium …
Definition of earned premium
There are several very technical definitions out there, but here's mine: earned premium is simply the money due to the insurance from it original due date. until the cancellation date. State laws, as well as the insurance companies' guidelines, dictate how long it is until the official cancellation, so it can vary from state to state. But it is still a certain period of time. Read on for an example.
How Earned Premium Works
Monthly premium due on January 1
The customer does not pay for the due date (for any reason) and the insurance finally expires on February 1.
The customer will receive an invoice for the premium from January 1 to February 1.
Technically, the insurance was in force all month – the cancellation did not occur on January 1, right? It happened on February 1st. And if a covered claim occurred, the claim would have been paid.
So the insurance company has the right to charge a premium for that time because it was earned by being in effect. In other words, it is guilty.
How to avoid getting invoiced for earned premiums (AKA How to cancel your insurance properly)
Whether it's a phone call, written documentation or what method your current insurance company requires, the BEST way to cancel a insurance via YOUR request. The coverage ends on the day you request, so there is no possibility of a earned premium situation.
It is never in your best interest to have the policy terminated if you do not pay. And here's a tip: if an agent or insurance company you switch to says otherwise, RUN. This exact situation will be yours. And you will be very unhappy. Because you continue to receive invoicing for the premium and if it is not paid, it will eventually go to a collection agency. And it's NOT fun. Just take a clean break from it and save yourself a lot of hassle.
We are here to answer your questions. Call us at (937) 592-4871 to review the policy or fill out the form below.