Making a late payment or failing to make a payment altogether is not a good habit to get into, especially when it comes to insurance. Missing insurance payments can not only lead to your policy being cancelled but can also result in debt collectors being sent to collect the money owed.
Given these serious consequences, it’s important to avoid late or missing payments on your insurance bills. Keep reading to learn more about debt collection for insurance companies.
Can insurance providers send policyholders to collections for unpaid bills?
Yes, insurance companies in Canada can send policyholders to collections for unpaid debts. Specifically, they can send your arrears to a collections agency. However, in some circumstances, the insurance company may have its own debt collection department. The provider can also sell your debt directly to the debt collections company.
No matter which method your insurance provider uses, the purpose is the same: the debt collector will aim to recover any delinquent debt (money owed).
The consequences of missing insurance payments
Missing an insurance payment is a serious matter. Therefore, if you have a missed insurance payment on your auto insurance, home insurance, or business insurance policy, you should rectify the situation as quickly as possible.
In a circumstance where your bank has dishonoured automatic bank withdrawals from your account, additional non-sufficient fund charges may have to be paid to your insurance company.
If you fail to respond to your insurance company’s attempts at contact regarding the missed payment(s), they may cancel your policy. This can have consequences, especially if the insurance is mandatory. For example, if it’s your auto insurance policy that was cancelled due to missed payments, then you will no longer be allowed to drive since car insurance is mandatory in Canada. Driving without it is illegal.
While other types of insurance, such as home insurance, are not mandatory, a lapse in coverage means that what may be your biggest asset is unprotected. It may also impact your mortgage loan.
Further, as mentioned, they can also send your debt to a collection agency. This can have several negative impacts, including reducing your credit score. As soon as your debt is transferred to a collection agency, your credit score will go down, which might make it difficult to obtain a loan, get a job, or rent an apartment in the future.
The debt collections process
If your insurance provider is unable to collect the funds owing, they may transfer your debt to a collections agency. You will then be required to settle your outstanding debt directly with the agency.
In the event your debt is sent to a collector, you will receive a written notice with the name of the debt collection agency, the name of the person or business you owe money to, and the amount you owe. It is always best to pay the amount owed as soon as possible and in full. However, if paying in full isn’t an option, contact the collections agency to negotiate a payment plan.
Tips to make insurance payments on time
Some helpful tips to avoid the penalties that come with late insurance payments can be found below.
- Pay your insurance bill annually rather than monthly. Doing so can save you money down the line as administrative fees may be added to each monthly payment. Plus, when you pay annually, you will only have one payment due date to keep track of rather than twelve. If paying your insurance bill annually isn’t feasible, request a monthly payment plan from your insurance provider.
- Set up payment reminders on your smartphone or email calendar that will notify you when it’s time to make a payment.
- Enable automatic withdrawals from your bank account so the money is automatically sent to your provider on the payment due date.
- Budget carefully so you always have sufficient funds in your account to make your insurance payments on time.
- If necessary, speak to your bank or other financial institution about adding overdraft protection to your account.
Contact BrokerLink for more information on insurance debt collection
If you have any questions about debt collection for insurance companies, BrokerLink can help. As an insurance brokerage, we operate independently of insurance companies. This means we can provide you with unbiased, objective advice on missing payments and debt collection.
BrokerLink has been in business for over 30 years, which means we know the ins and outs of the industry, including the consequences that come with missed or late insurance payments. Get in touch by phone, email, or in person at one of our many locations in Canada.
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