If you have taken out an insurance policy, you may lose track of time and forget when your deal ends. If you miss any reminders sent by your insurer, you may end up in a bit of a sticky situation.
Car insurance in particular is always required if you are currently driving, so missing a renewal date could mean you’re off the road until it’s sorted. This is why many people choose to have their insurance policies renewed automatically.
So, if you have taken out a car insurance policy, you can choose to allow to auto-renew when it comes to an end. This could take the pressure off you so you don’t need to worry about forgetting and being without insurance. Some people may be too busy to keep tabs on renewal dates, or are not easily reached by insurers, so an automatic renewal could be just what they need to stay in control.
However, there are some insurers who take this decision into their own hands, and instead of contacting you to let you know your policy is about to expire, may start up a new policy without your consent. This could be helpful for some people who are happy with their current insurance and provider, but may prove to be problematic for others who are instead looking for a change or were not expecting it. It could leave you with unexpected monthly payments being made, which could leave you with less money. Or you could have already picked a new policy to switch to, resulting in two insurance policies to your name, meaning double the cost and double the hassle.
How do you renew insurance policies?
Your insurer will send you a renewal notice around one month before your policy is due to expire. This gives you enough time to make an informed decision and allows you to compare prices from other companies, and to speak to your current insurer about price negotiations.
You can then either choose to renew your policy with your insurer, or you can decide to switch to another insurance provider with a better deal.
What are the advantages of auto-renewal?
It saves you the hassle of shopping around
For some people, spending a long time comparing policies and prices can feel like a nightmare. If shopping around isn’t up your street, auto-renewal could be just what you need. It takes away the stress of searching for new coverage so you can focus on other things. You won’t have to worry about spending a long time online, searching for cheaper premiums, and can instead take an easy route by allowing your insurer to do all the hard work. If you are not interested in hunting down a better deal through price comparison websites, automatically renewing your insurance policy could be the right fit for you.
It doesn’t allow you to be without insurance
If you choose to have a policy with an automatic renewal, you are less likely to end up with no coverage. You may have lost your letter from your insurer about your upcoming renewal date, or you may have too many other things on your mind to remember to renew or switch. This could mean that a policy with automatic renewal could be beneficial, to ensure you are never without insurance. The last thing you want to discover during a routine traffic stop is that your car insurance ran out weeks ago. With a guaranteed auto-renewal of your policy, you won’t have to worry about that happening.
What are the disadvantages of auto-renewal?
You can’t compare other options
With auto-renewal policies, you are unable to take the time to compare quotes from other companies. You are simply going from one policy to the next with the same insurer, potentially leaving you worse off financially. You could find a much better deal elsewhere than what you are currently getting, and all it would take is a short time comparing your options on a price comparison website. You can look at all of the current deals from various trusted providers, and pick one that works for you and your budget.
You may end up with double the coverage needed
If you are unaware that your insurance policy is being automatically renewed, you could end up with twice the amount of coverage at a high cost. Your insurer may not have informed you that your policy will be renewed automatically, so you could have already agreed to take up cover elsewhere. This means that when you think your current coverage will expire, making room for your new insurance policy, you end up with two payments coming out of your bank account and fast action needs to be taken to ensure you don’t pay any more than is necessary.
It could affect your credit
You may end up paying a premium you weren’t expecting if your provider automatically renews your coverage, which could have dire effects on your credit report. If you change addresses in between paying your last premium and your new unexpected coverage payment, it could end up hurting your credit by leading to a ‘default’ on your report. This could make it very difficult for you to get credit at a later date. This also applies if you have changed to a new debit or credit card since your last expected insurance payment. The first unexpected payment on your automatically renewed policy may try to come out of a cancelled or unused bank account, negatively affecting your credit.
Some auto-renewal policies may be unreliable and leave you without coverage
If you have set up an auto-renewal insurance policy, you may not even notice when your current coverage is coming to an end. Since you expect it to renew without your interference, you may simply put it out of your mind. However, a coverage provider might not always be the most reliable, so you could end up with no automatic renewal, and subsequently no insurance at all. If you do choose an automatically renewed policy, ensure that you are aware of its end date to keep an eye on future payments.
Unexpected payments could leave you financially fraught
When your policy comes to an end, you won’t be expecting any further payments. However, if an insurer sets up an auto-renewal policy without your knowledge or consent, you may end up making payments you are unprepared for. This could leave you in a financially difficult situation, with less money than you had planned after the unexpected payment. You could also be charged a cancellation fee by your insurer if you choose to cancel your policy, which is more money you were not planning on spending.