Car insurance and default under a dangerous combination. If you stop paying the insurance, you are left without protection. And if the car has not been deregistered, you are required to have at least Civil Liability insurance. Before you stop paying the insurance without canceling it, there are other much more recommendable options, which we will analyze in this guide.
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Car insurance and non-payment, a bad combination
For some people the temptation to save by defaulting on car insurance can be very high. However, failing to pay this amount, in addition to being illegal and dangerous, can be very expensive. The first thing to keep in mind is that car insurance is paid in advance, that is, before you can enjoy its coverage. The premium paid throughout this year covers during this time, until the next renewal, if it occurs. Stop paying means that the vehicle is left without any protection.
A second aspect is that, generally, the policy is renewed automatically, if it is not notified sufficiently in advance (expressly established in the contract signed between the client and the insurance company). If you cannot —or do not want to— pay for that coverage again, you must notify the insurer 30 days in advance, so that the insurance is not automatically renewed for another year.
Therefore, it is necessary to try to accommodate the insurance payment to the income capacity, plan it so that it does not come together with many other expenses and there is no money available to meet that commitment.
Generally, the premium is paid annually, but most insurers also allow you to pay every semester, quarter, and some even every month. However, if we manage to pay in comfortable installments, it is most likely that we will have to pay interest that may be too high.
One month grace
But, if you decide not to pay the insurance, despite these warnings and considerations, you should know that the insurance company has the obligation to grant a month of grace to the customer even though the corresponding premium has not been paid. This means that during that month the insurance will cover you and your vehicle even though you have not paid the policy. Taking more than that month of grace to pay for the insurance implies that the vehicle is left without any coverage. If the car, motorcycle or any other motorized vehicle drives on streets and highways without insurance, the fine can go up to 3,000 euros.
In addition, in the event that a claim occurs with the policy unpaid, the insurance company has no obligation to cover it. Precisely because the insurance has not been paid. This means that in the event of an accident, the client will have to respond with their own assets for any damage, since they do not have the protection of insurance.
The delay or non-payment of the car insurance premium can cause serious inconveniences and consequences, not only economic, in the case of having a claim in that period of time. Driving with a vehicle without insurance is an illegality that aggravates the driver’s situation in the event of being involved in an accident, even if he is not to blame for it. For that reason, not paying insurance can be very expensive in the end.
Pay in installments, an option
But what can you do if you don’t have money to pay for the insurance? One option is to split the premium payment. Virtually all insurance companies allow semi-annual or quarterly payment. There are even insurance companies that give more facilities and accept the monthly payment of the policy premium, but the installment payment is not free: the surcharge can be as much as 30%.
Another issue that must be made very clear is that, although insurance companies allow the payment of the premium in several installments, not paying one of those installments is equivalent to not paying the global amount. This is so because, despite these payment facilities, the annual car insurance premium is considered as an indivisible whole.
In the event that the client does not pay one of the terms established in the contract, the insurance coverage would be suspended one month after the date scheduled for payment because, in the event of non-payment, the insurance company is obliged to provide coverage to the customer. premium holder during the previously explained grace month. The insurance is valid for all purposes, even if it is unpaid, during that month. It should not be forgotten that, even if the coverage is lost, the client has five months to pay and recover their insurance.
Unless the contract has been terminated, during the period of six months following the expiration of the premium, the insurance coverage, once paid again, would be in force again in 24 hours.
In the event of non-payment of the first insurance installment by the client, the insurance company has two options: demand full payment of the insurance or, alternatively, terminate the contract for the first non-payment and terminate it. This last option is the most common.
Claims are not excessively frequent
During the 6 months following the expiration of the premium, the insurance company has the right to demand that you pay the amounts you owe on the policy. However, the procedural expenses are not worth it, and as a general rule, insurers try to avoid the executive process. Typically, the insurance company limits itself to terminating the contract that linked it with the client through the policy. Non-payment will have no further effect as long as the company understands it as the end of the policy and does not exercise its right to claim what is owed.
If the insurer does not claim any amount within that six-month period, the only consequence for the client is that their insurance contract has been terminated. In other words, the relationship between the insured and his insurance company ceases to exist.
In case of having other insurance contracted with the same company, it is very likely that the insurance company will take measures so that the same thing does not happen to you as with car insurance. You should also be very aware that being a defaulter on insurance can make it difficult for you to take out other policies.