Insurance policy holders are often on the lookout for better ways to save money. Occasionally, a policy holder might come across a better quoted deal on a particular car insurance policy. The policy holder in order to take advantage of this situation must cancel their policy with their existing insurance company and sign with the new one.
This may sound like a great idea, but if the insurance policy is still within the policy period, there may be complications. Some insurance policies may charge a fee or penalize a policy holder if a current policy is canceled within the policy period.
What Is the Definition of an Insurance Policy Period?
Policy period is defined as the length of time an insurance policy is valid. The length of time for the policy will vary depending upon the insurance company and type of insurance policy. The length of time for an insurance policy period could be determined in months or even years.
Will a Penalty be Applied for Cancelling During a Policy Period?
Insurance companies in Texas have the legal right to charge what is known as a short rate cancelation penalty. This monetary fee is assessed in an effort to recover costs associated with transferring the policy.
It is also meant as a way to cover the insurance company’s potential loss of profits, as the insurance policy holder agreed to a certain length of time in a contract and is backing out. That was potential profit the company anticipated which will no longer be available.
How Can an Insurance Policy Holder Determine if a Penalty Will Be Applied?
Any potential fees or penalties that will be assessed if a policy holder cancels a policy during the policy period will be outlined in the terms and conditions of the insurance policy. This section will determine how much the fees or penalties will be for this simple action.
Individuals shopping around for auto or car insurance policies may want to consider getting several quotes online. Obtaining several insurance quotes allows individuals to compare the various quotes rates and read over the terms and conditions to determine if a penalty will be assessed for cancelling during a policy period.