Insurance company bills me for coverage after policy canceled

UPDATED: Oct 14, 2020

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UPDATED: Oct 14, 2020Fact Checked

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I recently changed insurance companies for my home and auto insurance. I made sure the new policy was in place before canceling the old. I sent the cancellation notice to my new company by email so that they would have it in writing. I was assured the policy would be cancelled.

A couple of weeks later, I received a bill of around $50 from my old company stating they were charging me for post-cancellation coverage unless I sent them proof that I was covered during that time. I figured this was a way for them to get me to send them information on my new policy, which I know I don’t have to do. So I ignored it.

However, now I have received a notice from a collection agency for the amount they billed me. Is this legal? They have written proof of when I canceled my policy with them. I know I don’t have to prove to them that I have/had coverage with a new company. This can’t be legal. I’m considering reporting this incident to the state NAIC but I want to make sure I am in the right or I’m not missing some crucial information.”

Asked February 26, 2018

1 Answer

The question of legality in this specific situation is a difficult one given that insurance billing relies heavily on the terms and conditions of your original policy. Instead of immediately looking at the problem from a legal perspective, look at it from a common sense one.

Although your former insurance company's request for information and the $50 charge might seem on the surface to be an invasion of privacy and manipulation, that's not automatically the case. Since you didn't contact your old insurance company directly to discuss and plan out the cancellation, it isn't surprising that they're now asking for proof that you had coverage during the period that they would normally bill you. They are currently relying upon information from your new insurer. It is possible that the new insurer provided them with a date that indicates a gap in coverage. Arizona requires that your former insurer report your auto insurance policy cancellation/non-renewal to the Motor Vehicle Division within a 7-day period of the date given to it by your new insurer. You are also expected to give adequate notice of coverage cancellation to your former insurer for both the home and auto insurance policies.

As for the charge: Beyond a coverage gap, some insurance companies charge fees if you cancel with little notice or in the middle of your policy term. If your new insurer provided the notice to your old one too close to a premium payment due date, then it's reasonable that your former insurance company charged you. The continuation of any charges into collections proceedings depends on whether the $50 covers a partial or full premium payment or cancellation fees and the date that you switched companies.

Given that insurance non-payment negatively impacts your credit score and future insurance options, the best course of action is to speak with your former auto insurance agent and ask them to help you sort out this situation. Although email is a convenient communications tool, text-based contacts can create confusion. A phone-based, three-way conference call that includes your old and new agents might also help resolve this matter faster. If you still feel like you were charged incorrectly after that conversation, then contact a lawyer who specializes in insurance law to learn more about your rights.

Answered February 28, 2018 by OldTownInsurance

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