Ever hear of the term “a day late and a dollar short”?
Well, if you’re a day late updating your critical insurance data, you could be a lot more than a dollar short.
Not sure about that? Then consider the case of one New York City insurance customer who didn’t update his mailing address. That omission triggered a lapsed insurance policy -- and potentially hundreds, if not thousands, of dollars in policy renewal charges.
The story comes from the New York State Insurance Department, which came to the man’s aid (his name was not released) just as he was about to lose his life insurance policy. His trouble started when he moved to a new apartment, but failed to immediately notify his insurer that he had a new address.
Fearful that he might lose his coverage, the man called his insurance company and paid his life insurance bill by credit card. While he did receive a verbal confirmation of the transaction over the phone and assumed the money was transferred out of his credit card account, he wasn’t out of the woods yet.
Shortly afterward, the man received a written notice from his insurance company that left him reeling: Not only was a bookkeeping error made that wiped out his credit card transaction, his policy had been canceled because of lack of payment.
His next stop? The New York State Insurance Department’s Consumer Services Bureau. There, the agency was able to get the policy reinstated. That happened after the agency pointed out the insurer hadn’t provided clear instructions on credit card payments to the consumer.
The 'moving violation'
Call it the ultimate “moving violation." But at least the New York consumer walked away with his insurance – and the contents of his wallet – intact.
“We see this a lot,” says John Capuano, New York's associate insurance commissioner. “They move or for some other reason the insurance files go to the old address, and the policy can easily be canceled.”
But if your insurance is canceled because you didn’t update your personal information, that presents a host of new problems. Aside from the obvious one -- your insurance coverage ends -- a lapsed life insurance, auto insurance or health insurance policy means you’ll have to get a new policy. The new policy could cost a lot more, and possibly offer fewer benefits than you’d been receiving with the original policy.
The good news is that a lapsed policy is easily avoidable.
“When you see a policy cancellation, wrong addresses are surprisingly high on the reasons why. It’s really the address that’s most important,” Capuano says. “By law, insurance companies have to send written notice of a policy cancellation. But if the address the letter is sent to is the wrong one, the policy can easily be canceled.”
Capuano advises consumers to send a written notice of a change of address. “Certified mail is best,” he says. “But fax or regular mail works, too.”
Capuano adds: “If your notice is in writing, you’ll have the best shot of making your case if something goes wrong. But if you go through a call center, that won’t always provide the proof you need if there’s a problem."
When it comes to auto insurance, if your policy lapses and you’re stopped for a traffic violation, you may see your driver's license suspended – not to mention a stiff fine.
In Delaware, not having “active” auto insurance can set you back as much as $1,500 in court fines, and that’s just for a first offense. Other states aren’t so strict – California hits you with a $500 fine, but also may impound your car and suspend your license.
You’ll also likely face higher rates to renew your auto insurance. Consumers who let their auto insurance lapse are viewed as higher-risk customers by insurers – and likely will be charged more for a new policy.
Keeping your house in order
As for homeowner’s insurance, updating your personal information can mean the difference between security and disaster.
“I’ve found that homeowners only look at their policy once – when they purchase the home,” says Brian Smith, an insurance adviser with American Express Open and founder of the insurance website RiskReconnaissance.com.
If you move or don’t pay attention to the policy, that policy automatically will renew, and that can lead to inadequate coverage as well as financial losses.
“Nearly every homeowner’s policy automatically renews, unless there has been a catastrophic loss or the insurer has left the marketplace – like a lot of Florida insurance firms left the hurricane insurance market in recent years,” Smith says. “But if you make upgrades to your home and it increases in value, and if you haven’t updated your homeowner’s insurance, you likely won’t be properly insured. And that could mean you’re significantly exposed.”
Staying up to date
To keep your policy active and accurate, the New York State Insurance Department recommends following these steps:
• Always keep insurers advised of all changes affecting policies, including changes in address and marital status.
• Review bank statements or financial records to ensure your insurer has received premium payments.
• Consider using an automatic checking or debit account if your insurer accepts payment in this manner. While automatic payments may result in higher fees, this method could help premium payments stay current.
• Make sure you cite your policy number on all communication with insurers.
In the insurance world, errors of omission (like neglecting to file a change of address) can lead to significant financial losses. Fortunately, the correction is an easy one – but mandatory for insurance customers.
“Too many people unknowingly allow an insurance gap to develop over time by forgetting to take a look at whether their insurance coverage is sufficient, and may be surprised to discover this could leave them paying out of pocket in the event of a claim,” says Bob Lundgren, a vice president at MetLife Auto & Home. “Fortunately, it’s never too late to step back and take a quick inventory of where you’ve been and what you have.”