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Most insurance companies offer several different payment options.  There are benefits to “spreading the pain” over the year … but there are also some hazards with pay plans.

Pre-authorized Chequing – The annual premium plus a service fee (ie. 3%), is divided by 12 – which equals the monthly payment.  The down-payment (1^st and last month) is due up front.  An authorization form is sent to the company along with a void cheque.  Every month, 1/12 is automatically withdrawn from the account.  The down-payment is required only once.  Payments are adjusted automatically as you make changes to coverage.  Variations include 6 month plans, higher interest and deposits, and deposits each renewal.

2 Pay Plan - 50% due upon effective date of policy and 50% due 60 days from effective date of policy – may have a $5-$10 processing charge.

3 Pay Plan - 40% due on the effective date of policy, 30% in 60 days, 30% in 120 days - a processing charge may apply.

“Plastic” - Many companies now offer the option to pay for the entire premium by Visa or Mastercard.  A signed authorization is required.

Hazards of Pre-Authorized Chequing - It is important to remember that if your account is short (even a few cents), the payment will go NSF.  It is critical to plan ahead when making changes to coverage.  Service fees for NSF’s can be as high as $50 charged by both the  insurer and the bank. Some companies cancel immediately when receiving an NSF, others forgive one a year.  Some will try again 3-5 working days later and if they get the payment the 1^st NSF is ignored.  Others call the brokerage to see if they can contact the insured to get payment, and some send a registered letter to the last known address of the insured and the policy is cancelled 15 days later.  If you have been cancelled for non-payment many companies will not offer a payment plan for 2 years, and some will not even insure on agency bill.

Agency Bill – Payment is made directly to the brokerage and you are billed as changes are made.

Other options to ease the crunch could be changing your renewal date to a better time of year, or alternate financing options if you are not eligible for a company payment plan.  Your broker can help you determine what works best for you.