How does an insurance policy's Six Month Premium work?

Question

So, I'm wondering... How does an insurance policies Six Month Premium work? Say full coverage would cost me $200/month and liability would cost me $100/month, but I decided to get full coverage and started paying off my Six Month Premium, say 3 months down the road I decided to drop full coverage, would what I payed off on my Six Month Premium for full coverage carry over to my new Six Month Premium on liability? So my Six Month Premium with full coverage was 1200, and my six month premium with liability is 600, but I already payed 600 off while I had full coverage, would the rest of the 6 month policy be free? Haha, I'm having trouble formulating this into words, but does anybody know what I mean?

Answer 1

Auto insurance covers you for a period of time. Any change to your coverage level will result in a change to what you owe for the rest of the coverage period.

If you have a birthday, get married, sell a car, or decrease the amount of coverage the company will generally send you a check.

If you increase the coverage level, add a driver, add a car they will bill you for what you owe.

If is was very close to renewal time they could decide to credit your overage to you next bill.

If you cancel the coverage and you have paid more then the coverage you have received you will get a check refunding the overage.

Answer 2

The easiest way to figure this out is to call your insurance agent or to call the carrier directly if you don't use an agent. However, let me try to answer based on my understanding of your question. So, your very expensive inital 6 month policy for full coverage is costing you $1,200 in total and in 3 months you pay the $600 you owe toward that before deciding to switch to liability only. While the change will save you $300 over the remaining policy period it will not have the effect you desire. That is because in the first three months you were paying for exactly what you got, full coverage, and you change is not retroactive back to the start of the period because, had you been in an accident in that first three months, you would have had your comp & collision to cover you for said claim. What will happen then is the insurance company will process a negative endorsement to the account prorated for the remaining coverage period such that you will now only owe $300 more dollars instead of $600 more, but you will also have less coverage. Make sense?

One more thing. Had you paid the whole policy in full at the begining of the coverage period (which will usually get you a nice discount) then you would have received $300 back. How they give it to you often depends on both the carrier's capabilities as well as on how you paid (check, auto-debit, credit card, etc.). If however, you make a change close to your renewal date then they may just apply the balance, positive or negative, to the bill for your next coverage period. Or at least they may give you that option.