The Office of General Counsel issued the following opinion on April 29, 2003, representing the position of the New York State Insurance Department.
Re: Cancellation of Insurance Policy for Non-Payment of Premium Installment Fee, Late Payment Fee, and Reinstatement Fee
Question Presented:
May an insurance company cancel an automobile insurance policy for non-payment of an installment fee, late payment fee, or reinstatement fee? 1
Conclusion:
Yes. An insurer may cancel an automobile insurance policy for non-payment of an installment fee, late payment fee, or reinstatement fee.
Facts:
The inquiry was general in nature and no specific facts were presented.
The Department makes a distinction between the meaning of the terms "late payment fee" and "reinstatement fee." A "late payment fee" refers to a fee associated with premium payment that is made at a time later than the premium due date, but prior to both policy cancellation and the time in which an insurer may reject premium payment. A "reinstatement fee" refers to a fee associated with the reinstatement of a policy after the cancellation date, or after the time in which an insurer may reject premium payment.
Analysis:
The Department views late payment fees, reinstatement fees, and premium installment fees to be properly classified as fees that are outside of the rating structure, and which do not have to be filed with the Department, or included as part of the manual rates. Such fees may be charged separately and apart from the policy premium because the expenses that such fees are meant to deflect arise independently from the issuance, underwriting, or general maintenance of insurance policies. 2 These fees arise in relation to the way an insured opts to pay the premium, or are incurred because of an individual insured’s lateness in paying the premium, and not in relation to the expenses incurred on behalf of insureds generally. Certain other fees, such as "policy placement fees" and "origination fees," are part of the policy rate because they are part of the insurer’s expenses in issuing the policy. Such fees generally relate to underwriting and arise in relation to every policy issued.
An insurer may charge late payment fees, reinstatement fees, and premium installment fees provided that the insured was made aware of these fees prior to being charged such fees. These service fees, and any consequences an insured would experience for failure to pay them, must be clearly stated to the insured (i.e., by including this information in the insurance policy form or in the billing statement). To preclude discrimination, the amounts and conditions of these service fees must be applied equally to all insureds of the same class that are subject to the fees. In addition, the service fee charged must be reasonable.
The failure by an insured to pay these insurer service fees, where the insured was made aware of the amount of, and the conditions placed upon, such fees prior to being charged them, may provide the basis for policy cancellation under N.Y. Ins. Law §§ 3425(a)(10) and 3426(a)(3), which are written in identical terms, and state in relevant part:
"Nonpayment of premium" means the failure of the named insured to discharge any obligation in connection with the payment of premiums on a policy of insurance or any installment of such premium . . . ."
For example, an insured receives a billing statement that indicates the charge of a late payment fee if premium is not paid by the due date. The insured does not make payment on the due date. The insurer sends a notice of cancellation that states that the policy will be canceled for non-payment of premium and the late payment fee if both are not received by the date specified in the notice. The insured sends payment of premium within the 15-day grace period provided by N.Y. Ins. Law §§ 3425(a)(10) and 3426(a)(3), but does not remit the late payment fee within that time frame. The insurer may cancel the policy for non-payment of the late fee under these conditions.
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.
1 An automobile insurance policy is subject to the cancellation (and other) provisions contained in N.Y. Ins. Law § 3425 (McKinney 2003 Supp.) where the predominant use of the vehicle is for non-business purposes and the named insured is a natural person. In all other instances, N.Y. Ins. Law § 3426 (McKinney 2000) applies. 2 This opinion does not address whether these fees are part of the premium for tax purposes.I think we can all agree that paying bills sucks. It’s the least fun part of being a responsible grown-up, or #adulting, as the kids like to call it these days.
The only thing that’s worse than paying bills? Missing a payment …or having a payment bounce. Yeesh. If this happens, you usually have to pay an NSF fee of $25 – $45 at the bank (NSF stands for “Non-Sufficient Funds”) and go through the extra hassle to get the bill paid. That is never a fun conversation! Plus, some insurance companies charge their own NSF fees on top of the ones your bank charges.
When it comes to your car insurance, a missed payment can mean a lot more than a fee or two and a little extra hassle: it can mean the cancellation of your policy. If your car insurance policy is cancelled for non-payment, you no longer have insurance and can no longer legally drive your car. You also will have a “Cancellation for Non-Payment” description added to your insurance record.
Many insurance companies won’t even offer you a policy if you have more than one Cancellation for Non-Payment on your record. Why? Well, there are two key reasons for this:
(1) they’re worried that you’ll miss insurance payments with them as well and that managing your account will be a hassle, and
(2) statistics show that people with a “Cancellation for Non-Payment” on their insurance record are more likely to be in an at-fault car accident in the future.
Basically, you’re viewed by insurance companies as a much higher risk when you have this dreaded label attached to your record. Many companies won’t offer you a policy at all, and those that actually will, offer you a policy with a higher premium. In addition, you may have to pay this entire – and often expensive – insurance premium upfront. Ouch!
Already Have a Cancellation for Non-Payment On Your Record?
If you’ve been cancelled for non-payment in the past, give the qualified team at Cheep Insurance a call. One of our brokers would be happy to shop your policy for you! We have the largest selection of insurance providers in Atlantic Canada, including several car insurance companies that specialize in “non-standard” insurance and offer policies for clients with cancellations for non-payment.
We understand that sometimes life happens and unforeseen circumstances can lead to missed or bounced payments. When speaking with one of our Cheep Insurance representatives, he or she may even be able to set you up on a monthly payment plan through an in-house financing company. We want to make sure you’re getting the best insurance rate available so you can build your insurance record back up. After a period of time, once your insurance record has been re-established, we can help you transfer your insurance policy back over to a standard insurance company so you can get a better rate.
Give us a call at 1-866-92-CHEEP or (902) 463-1675. Our team is ready to assist you in finding the best price available for your insurance needs.
There are many reasons why your car insurance policy could have been canceled. The insurance cancellation experience is both frustrating and scary. In some cases, you may not even know the reason why your insurer cancels your policy. That’s perhaps the most worrisome because the repercussions of a canceled policy can be costly. The first thing to do is to take a deep breath and find out exactly why it was canceled. Was it something you did? Was it your driving record? Did you forget to pay? Once you know the reasons you can take the next steps of getting your car insurance back. If you want to compare rates and find affordable car insurance,try isure’s online quoting for a no obligation look at what you could be paying.
WHY WAS MY AUTO INSURANCE POLICY CANCELED?
Ontario insurance companies are required to detail why they are canceling your car insurance. The reasons can vary but generally come down to a small group of possibilities. The most common reasons your car insurance policy was canceled include:
- Breaking the terms of your insurance policy. It’s important to know what your car insurance policy covers and what it prohibits. If your policy says you cannot use your vehicle for business purposes such as Uber, then you should not run that type of service. Make sure to read your policy in detail.
- Lying or committing fraud. If you ever need to make a claim, an insurance company will dig through your application and history to make sure everything is legit. If you’ve lied about something, or you are making a false claim they can deny your claim and cancel your insurance.
- Being a poor driver. One of the biggest reasons why some people experience a car insurance cancellation is if they are a poor driver. Insurance is a business about risk, and if someone is too risky, it’s bad business to insure them. You could make too many claims, get too many driving tickets or be in many accidents. Generally, this will give you the designation as a high risk driver. High risk drivers need to seek out high risk insurance, which is generally more expensive.
- Non-payment or failure to pay. One of the most immediate ways to have your insurance policy canceled is to not pay it. Whether the payment slipped your mind, or you made a change at your bank – in either case, a non-payment is serious. Unlike missing a phone bill, missing an insurance payment can be damaging to your access to cheap car insurance.
WHAT DO I DO AFTER AN INSURANCE CANCELLATION?
The first thing to do after an insurance cancellation is to find out why your insurance was canceled. Without knowing the root cause, you can’t address it properly. After you know why your insurance was canceled, you can determine if you should start looking for new insurance. You can start by requesting an auto insurance quote via isure. We compare the rates of dozens of the top car insurance providers in Ontario to get you a great policy for an affordable price. If you are as a high risk driver, you may still be able to find affordable car insurance through us.
Now, while you’re going about the task of re-acquiring car insurance you must avoid using your car. In Ontario, it is a law that all drivers must have insurance. If you drive without insurance, you risk major fines, license suspensions, and worse consequences. Consider public transit, cabs or car pool services such if they are available in your city. If unavailable, cost prohibitive or unnecessary – you should consider a bicycle or even and e-bike.
DO NON-PAYMENT AND INSURANCE CANCELLATION AFFECT MY INSURANCE RATE?
Yes, a non-payment will affect your car insurance rates. If you lose your car insurance due to a non-payment, the impact is immediate. Unlike forgetting to pay a phone or hydro bill, insurers insist you to pay on time. There are several possible outcomes:
- Insurance cancellation. Insurers can cancel your policy immediately if you have a non-payment. Without insurance, you cannot drive.
- Fees. There could be extra fees that are charged by the insurance company.
- A Note on your Account. An insurance company may forgive you one time if you’ve been a long-time customer or there are extenuating circumstances. That said they will likely put a note on your profile about your payment history.
A non-payment can also result in your insurance premiums going up. Worse still, if you have many non-payments along with driving tickets, at fault accidents or claims, you could be labeled a high risk driver. High Risk insurance is more expensive than normal insurance. As such, you should always pay your insurance premiums on time.
IF I NEED HIGH RISK INSURANCE, WILL MY ONTARIO INSURANCE COMPANY CANCEL MY CURRENT POLICY?
High risk insurance is a type of insurance designation that you get if you’ve made many errors as a driver. This title can come from car accidents, DUI, speeding tickets, excessive claims and other things related to your driving. High risk insurance costs significantly more than regular insurance, sometimes up to 5 times as much. If you become a high risk driver, your insurance company may decide to cancel your insurance when it’s time to renew your insurance policy .
CAN I CANCEL MY CAR INSURANCE EARLY?
Yes, you can cancel your car insurance early. The best way to cancel your car insurance is first by contacting your insurer. The worst thing you can do is stop paying. By having a non-payment, your insurance policy will be canceled BUT you’ll also have it listed on your record. Instead, you will need to pay a small fee for each month early that you are canceling. To find out how much it will cost, use our convenient online Cancellation Calculator.
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