Legal Question in Business Law in California

Re: Auto Insurance Company Wants Payment Before Start Of Policy Period

The first thing you should do is determine whether this company is licensed to sell insurance in California, through the office of the insurance commissioner.

If they are, the payment scheme is probably legal. Companies are unlikely to risk their licensing on an unlawful payment scheme, and as a general rule an insurance company can propose its own payment schedule based on their view of the applicant's credit worthiness and what the market will bear.

However, there are limits, and the place to inquire (as to license and legality of payment schedule) is the insurance commissioner.

Re: Auto Insurance Company Wants Payment Before Start Of Policy Period

I do not think it is unreasonable to seek advance payment for an insurance policy, what with the paperwork and the need to determine the insurable interest. Nevertheless, I second what Mr. Whipple suggests, if that would increase your comfort level.

Re: Auto Insurance Company Wants Payment Before Start Of Policy Period

Howdy:

And, won't they get incredibly rich off a month's worth of 5% interest on $285?!!?

I've worked in insurance. Insurance companies begin the renewal process 90 days before the expiration of the policy.

From the time they receive the payment, it'll take several days ... maybe a week ... to process it; another several days ... or a week ... to prepare the renewal policy and associated paperwork; and, about a week for the post office to get it to you. The result is that you receive your policy ... and the all important insurance cards ... a week before the new policy will take effect. (Although, some companies send the new insurance cards with the bills.)

Failing to pay for the policy by the due date will not affect your current policy. And, if the payment is received by the end of the current policy period ... received and processed, that is ... you're coverage will continue.

But, if you value your policy, it would be unwise to push the limit too closely. If your payment is processed after the end of the current policy period, then the new policy will be a reinstatement. Many companies will only do that twice.

Considering the amount of the bill, the wisest course is to pay by the requested due date. That will ensure seemless continuation of the policy.

rkr