Car insurance is one of those financial responsibilities you can’t escape if you want to drive – unless of course you care to join the morning rush hour SMRT crowd *scoots in a few steps to make room for you*.
Hmm, didn’t think so.
But let’s be honest, when it comes to the expense of car insurance – you’re going to be in one of two groups:
- You don’t really care about the cost: The cost doesn’t even register as a blip on your budget radar; you only care that you have it, as required by law.
- You really care about the cost: Every dollar counts in your household, so you want a policy that saves you money and fits right perfectly into your budget.
While there’s a HUGE difference in how much both groups are willing to pay for car insurance, there’s no difference in how they pay – with auto renewal being a popular option many car owners.
But regardless of your reason for using auto renewal (convenience, cost, etc.), if you’re not careful, it can end up costing you MORE than you imagined.
Forgetfulness Can Cost You Big Time!
Auto renewal via Interbank GIRO can really be a blessing when buying car insurance. That’s because you don’t have to worry about writing checks every month to your insurer, paying late, or having your policy lapse because you missed a payment.
In other words, you use automatic renewal because you don’t want to worry about having to recall whether you made payment or not. The only thing you need to worry about is having enough cash in your account to cover the payment.
But the irony is this – your desire to “not worry” about your payments being made by using auto renewal can also be a curse that can land you in serious financial trouble if you’re not careful.
You forget to renew your automatic renewal
Not all insurers offer a continuous automatic renewal payment plan that only stops once you cancel it. Some insurers after a 1-year policy period require you to “manually” renew your policy with them again.
Of course, if you ignore your insurer’s emails or your email junks anything that smells remotely like something sales related, your policy could lapse.
And of course, all it takes is one traffic stop or accident to make you aware of that costly mistake. So you’ll not only have to deal with fines or pay any damages out of pocket – but you can even have your license suspended because you were driving without insurance coverage.
Just check with your insurer to see how long the automatic renewal period is for your policy, and whether is renews continuously.
You forget to cancel automatic renewal
Now here’s the other side of the automatic renewal coin – having a car insurance policy that continuously renews every policy period. If that’s what you want in a policy, then you’ve got nothing to worry about, but it becomes a major problem once you forget that you’re paying for it.
For example, let’s say you currently have a continuously renewing policy for your vehicle. But after one of your friends makes a comment that you drive a “girly” car, you decide you need a change. So you sell your car to get something… a bit more “manly.”
A few months pass by and you notice something’s a bit “off” with your bank statement. That’s when you realize that you’re still paying the insurance premium on your old car. It’s not a common mistake, but it can happen if you’re not careful.
You forget to check how much you’re paying
Here’s another big problem when it comes to automatic renewal – not knowing how much you’re paying. If your car insurance policy is one that continuously renews every policy period, don’t be surprised when you check your bank statement to find that your premium has gone up!
Perhaps the biggest misconception about car insurance is the concept of “loyalty” discounts. True, some insurers offer discounts, but it’s not exactly a rule among insurers. The reality is that an insurer can increase your premium for many reasons, even if you’re accident free. And if your premiums go up without you realizing it, you could end up losing hundreds or more over the course of your policy period.
If you take it for granted that your insurer will always “keep” your current premium the same price, you might end up paying way more than you intended to, and you won’t know it until you check your bank statement.
Final Note: I’m not saying that you shouldn’t use automatic renewal for your car insurance policy. It’s pretty damn useful as long as you don’t completely forget to check that you’re paying what you agreed to pay, when you agreed to pay it.
Plus, if at any time you think you’re paying too much for car insurance, you can always switch policies. Thankfully, you can find a better, cheaper car insurance policy with MoneySmart in just a matter of minutes.
Have you had any negative experiences with automatic renewal of your car insurance? Share your experience with us here!
Keep updated with all the news!
Get the latest personal finance tips and tricks delivered to your inbox!
We promise never to spam you!
Tags: Car Insurance