This facility often misunderstood and misused. There is nothing stopping you from getting a few quotes and switching to a better and/or cheaper auto insurance company before this facility kicks in. Anyway, this instruction should only be used when there is no other communication until the last minute. You can set an alternative coverage to take over and let the existing policy expire on the due date by canceling automatic renewal instructions and payment arrangements (ideally with the bank as well) by then.
Very rarely, people may end up with two policies because they don’t even know that they have given a permission in the process of buying car insurance that the money can be taken automatically for the next term. In such cases, the previous company would have to cancel it and send you full premium refund, even if you realized it after several months. All you need to do is to tell them it shouldn’t have happened and show them that you have had another coverage since and happy to keep it. There is no logic to having two since only one of them could compensate you anyway. So, it was clearly unintentional.
Policyholders often give authority to their carriers to automatically renew vehicle insurance when there is no further instruction at the time of its expiry and take the premium out of designated account or card. This very thoughtful provision prevents an unintended coverage lapse for many reasons, including oversight and being physically unable to communicate the intentions to carry on.
However, this is used and interpreted totally out of context to mean that motorists don’t now need to do anything since it is all set up. They don’t need to check that the policy still meets their requirements or get alternative quotes to see if the premium is still competitive. When, it is taken like this auto-renewal of car insurance only serve the companies since it encourages drivers into laziness and they benefit from it. Often people don’t react when they have an unfair rate increase and that shifts market conditions to favor providers and not customers.
You would still get a timely renewal notice but most automobile insurers like to insert a line in bold laters to say, “you don’t need to do anything if you are happy with the current coverage. We will take the premium and carry on with it“. Such suggestion is very cunning to say the list.
If you were to forget or you were away, it is great that it would be kept in force thanks to this 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 the payment may not go through. You should still keep an eye on it and make sure that it is done. It is best to look 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 requirements may change with it. You should check at each auto insurance 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 it doesn’t mean much. For example, dropping Collision and Comprehensive on an old automobile can save you money and offer more options if you suffer a 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 the 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 the 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 were to have an accident ($2,500 – $1000 – $500 – $500 = $500).
You have still couple of problems. First of all, one claim will affect rates not only next term but the following three years. Secondly, would you want to get $1,500 to repair an old car? You would probably want to cut your losses on this one and spend the money to buy a new car. This may still be possible though if you could persuade them to pay you direct rather than to a repair shop. With automatic renewal in place you are not likely to think these intricacies and make changes. You would probably let it slide as it is.
The third 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 quotations. Renewal deadlines are the best times to switch vehicle insurers, as you would not be facing any cancellation fees and deal with extra work you would face later on.
If everything checks out and it is still one of the most competitive options you can still let the existing policy run for another term. People should make this distinction between leaving it be because they couldn’t be bothered and because it is still a pretty good deal.