Can you get car insurance if you owe another company?

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In a nutshell...
  • If you are behind on your premiums, your policy could be canceled
  • Pay off old premium debt as soon as possible to protect your credit rating
  • Other companies may still allow you to start a new policy even if you owe another company
  • Shop and compare and ask your agent to explain how this works

Are you between car insurance policies and owe a previous company for late premiums? Was your car insurance policy canceled due to non-payment?

Canceled insurance is a common problem that many car owners experience if they failed to pay their premiums on another policy.

But don’t despair. There are some good ways to handle this so that you can get the coverage you need as soon as possible.

Here are some ways that you can handle this situation if you find yourself with old premiums that are due.

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Option #1: Pay off the Balance

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One question you will want to ask yourself first is whether or not you were happy with your previous insurance company. Did it meet your needs? Why did you get behind in the premium, to begin with?

Sometimes a lack of planning or disorganization may lead to failure to make a payment. One payment missed is not too bad as long as you pay it within 30 days. But if you fail to pay by that time, the insurance company may cancel your policy.

If you do choose to pay the balance, it is fairly likely that the company you owed the money to will reinstate you fairly quickly. Once you are no longer in the negative financially with them, you are again in good standing.

Paying the balance ASAP is the best situation only if you plan to stay with that company.

However, if you choose not to stay with that company, you may want to try something else.

– Do I still owe the money if they cancel?

Some people wonder if an insurance company cancels if they will still owe the money for the unpaid premium. The answer is “yes!”

Even though you are no longer being covered from the period after your company dropped your policy, you still owe that company for the previous premium amount that you were delinquent on.

Insurance is paid for in advance. Insurance laws state that you are not covered until your initial premium is paid.

So, when an insurer drops you for non-payment of premium, you still owe for the late premium that you had the insurance with, even though you are not continuing with that company.

The unpaid premium, in this case, becomes like an unpaid credit card bill, except that it does not accrue interest over time.

Option #2: Find Another Company

If you decide you were not happy with the previous insurance company, you can always opt to find another one.

By shopping and comparing insurance policies, companies, and rates, you can test out the other coverage options and begin a new policy, even if you owe a previous company for back premiums.

– Will the new company let me start a policy if I owe another one?

The question of whether or not a new company will allow you to start a new policy is solely in their hands.

Insurance companies are like any other company in that they must keep their ROI (return on investment) high to stabilize their debits and credits. There are checks and balances with any business and insurance is no exception.

In fact, especially in insurance, companies are required by law to keep a large amount of “reserve” or positive cash flow on hand in the event of large claims so that they can pay each one promptly. Failing to do so puts the insurance company at great risk for foreclosure or penalties.

– The 30-Day Rule

Insurance companies have 30 days to advise you that your policy may be canceled before they do it. 30 days gives you ample time to pay your premium or to decide whether you wish to go to another company instead.

If you receive a notice from your insurer warning of cancellation, you will need to either pay your premium to stay with your current carrier or find a new one.

– Paying Late Premiums

Because of these laws and the way insurance companies have to do business, they are justified in asking you to pay any back premiums that you owe.

However, your new company may allow you to come onboard with them, even if you owe a previous company.

It is still in your best interest to pay off the old debt to the former company as soon as possible since your credit history is also likely to affect your premium rates over time.

Also, remember that it may be harder to be accepted by the new company if you owe a previous company for unpaid premiums.

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Option #3: Start A New Policy and Deal with the Debt Separately

If you have decided to start a new policy with a new company, you do not have to pay off the old premium. If you decide to stay with the old company, however, you will not be able to reinstate your policy until you pay the old debt off.

You need to decide whether you were happy with the previous company before you start a new policy. You should also remember that you will not have coverage if you have let your old policy lapse until you pay a new premium to the new company to start your policy.

It’s always in your best interest to pay off any lingering debt, no matter what kind of debt it is. Old debt just accumulates over time and causes your credit rating to drop and can keep you from being able to get the best rates with any new companies you deal with.

– How Old Premiums Affect New Premiums

One important point to keep in mind is that new companies will use your old company as a guideline in determining how well you pay your premiums.

If they think you are an inordinate risk that may cost them money, they may charge you higher premiums.

For this reason, it is best if you can pay the delinquent amount on your previous policy before applying for a new policy.

Don’t Drive Uninsured

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The most important point we should make, though, is that you do not drive insured.

Driving with no insurance is taking too great a risk and can put you in a situation that can result in a huge financial loss if you have an accident while driving.

If you are short on cash to pay off the old premium and it is holding you back from reinstating or getting a new policy with a new company, you should try every means possible to pay off the old debt.

Take out a temporary loan from a friend or someone who is willing to help you out to pay the overdue premium so that you can get insured as soon as possible.

It’s not worth the many risks and penalties you may face if you have an accident or are stopped by a police officer while between policies.

Proof of Insurance Is A Requirement

This site shows you the general penalties for failure to have auto insurance in the various states.

Make sure you know the laws in your state but always be able to produce proof of insurance when stopped.

Shop and Compare Insurance

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The best thing you can do is to stay up on your premium payments. Remember that insurance should be a top priority because the money you save not paying your premiums pales in comparison to what you could owe if you have an accident while driving without coverage.

Shop and compare the various companies and see what they can offer you.

Even if you owe for a previous unpaid premium, you may still be able to start a new policy with a new company. Just make sure you pay the old debt off as soon as you can do so, to protect your credit rating and keep your premiums as low as possible.

Start comparison shopping by using our FREE online quote tool! Enter your ZIP code below to get started!

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