Question: My auto insurance will automatically renew and my insurer will take money from my card at the renewal time. Does that mean I don’t need to worry about automobile insurance any more?
Answer: Yes and no. If you were to forget renewing your policy or you were away, it is great that your policy will be kept in force thanks to automatic renewal arrangement. However, first thing you should make sure is that your payment details are up to date and still valid. For example, credit cards expire or you change banks that your auto payment option may not work. You should still keep an eye on your renewal and make sure that it has gone through. It is best to look at for the confirmation on the date of expiry just in case and contact the company if you don’t get it.
Secondly, life changes and your auto insurance requirements may change with it. You should check at each renewal if there is anything you want to add or drop. This keeps it fresh and up to date. You shouldn’t wait until you have a claim to realize that you don’t have sufficient coverage or you have coverage that is not worth much to you. For example, dropping collision and comprehensive coverage on your old automobile can save you money and offer more options if you suffer an insurable loss.
For example, you may have an automobile that is worth $4,000 and you have an accident with damages of $2,500. Let’s say your collision deductible is $1,000. If you make a claim you would get $1,500 after deductible. Let’s say you have already paid $500 to keep collision and comprehensive coverage and your premiums will increase another $500 if you make a claim. That is $1,000 out of pocket again. So, your gain for keeping the coverage is $500 as you had an accident ($2,500 – $1000 deductible – $500 premium paid – $500 premium rise next term = $500).
You have still couple of problems. First of all, one claim will affect your rates not only next term but the following three years. Secondly, would you want to get $1,500 from your insurer to repair an old car? You would probably want to cut your losses on this car and spend the money to buy a new car. This may still be possible though if you could persuade your insurer to pay you direct rather than to a repair shop. With auto renewal in place you are not likely to think these intricacies and make changes. You would probably let it renew as it is.
The second point you should consider is to check if you are still getting a good deal. It only takes several minutes to get a few alternative automobile insurance quotations. Renewal deadlines are the best times to switch auto insurers as you would not be facing any cancellation fees and deal with the work of canceling your policy.
You can read more about Car Insurance Automatic Renewals and how they serve policyholders’ and insurers’ interests. Have a good read and see what is best for you. You can still let it renew if you cannot find anything better.