During the coronavirus pandemic, relief options like grace periods and payment plans may be available.
Insurance premiums might be a concern if you are financially strapped due to the coronavirus epidemic. Instead of just not paying your bills on time, reach out to your insurance company. Customers in financial distress are more likely to be helped by companies.
Some state insurance departments encourage or order companies to temporarily do any of the following:
- Late fees and other penalties not applicable
- Create flexible payment plans.
- Nonpayment can cause policy cancellations to be paused
- Grace periods are usually a 30-day period following payment due. This is when you can still make payments and don’t lose your coverage.
“It is important to contact the insurance company and explain the situation. They may be able to provide some relief. Ask about other options than cancelling your coverage, says Erin Ardleigh of Dynama Insurance. This independent brokerage is based in New York City.
Here’s a more detailed look at what you can do if you can’t pay your bills during the pandemic.
Car insurance is required by most states. If you don’t stop driving, losing coverage will not be an option. You can get COVID-19 auto insurance reimbursements or adjust your policy.
Many of the country’s biggest auto insurers are giving customers a partial premium refund during the pandemic. Allstate, for example, is offering a 15% average refund to customers who purchased car insurance in April, May, and June. State Farm is currently working to reduce the average rate by 11% for all policies.
As a last resort, you can consider reducing coverage. You may be able drop optional coverages, although minimum liability insurance is required in most states. Your contract for a car loan, lease or purchase of a vehicle requires collision and comprehensive insurance.
Other options are available if you don’t plan on driving your car during the pandemic and don’t have a lease or loan.
- Suspending coverage.
- Cancelling car insurance
- Reduce your coverage to comprehensive-only, which protects your vehicle against damage while it is stored.
You may need to file an “affidavit to non-use” with the state department of motor vehicles if you choose to pursue any of these options. You may also find that your insurance rates will rise if you cancel your car insurance.
Life insurance companies offer extended grace periods for pandemics just like other insurers. However, life insurance is not required by loan contracts or regulators so you can drop coverage at any time.
If you can’t pay for your life insurance during the coronavirus outbreak and want to keep your coverage, your options differ depending on whether you have term or permanent insurance. If you are unable to pay within the grace period, your coverage will likely be cancelled if you have term life. If you have a permanent policy, however, you have more options.
Many whole life policies offer options for paying your premium in different ways. Jon Voegele (board chair of Life Happens), an educational non-profit supported by brokers and insurers, stated in an email that the insurer might be able use part of the policy’s cash value.
The cash value of your policy will reduce the death benefit. If you take out too many policies, it could cause coverage to end.
These are other ways you can lower your premium for life insurance
- Use dividends. Life insurance companies often offer policies that pay dividends to policyholders. These dividends can be used to pay your premiums.
- Reduce your death benefit. Although this is not always the best choice, it can lower your permanent or term premium while still maintaining some coverage.
- Change to term life. You may be able, depending on the company’s policy, to cash out your existing permanent policy and purchase term life insurance. Term life insurance is less expensive than whole life, but it will not provide a death benefit if the policy term ends.
Insurance for homeowners
Some home insurers extend grace periods and don’t charge late fees. They won’t cancel your home insurance coverage for a short period of time, depending upon state guidelines.
You could reduce your coverage if you are unable to pay the payments within the grace period. You should have enough coverage to rebuild your home if it is destroyed. This should only be considered a last-ditch solution.
You might consider cancelling your coverage. While homeowners insurance is not required by law, it may be required by your lender if you have mortgages. You can find yourself in serious financial trouble even if you don’t have a mortgage.
Insurance for health
Many states have banned insurance companies from cancelling coverage for nonpayment or collecting reinstatement fees or late fees. These policies are not valid for renewal after May. Check with your insurance company for any updates. You’ll be able to pay your monthly bill within a 90-day grace period if you have a Marketplace Plan and are eligible for lower premiums.
Except for certain life events, such as the loss of employment or income change, you can’t sign up for health insurance during the annual open enrollment period. These restrictions may prevent you from switching insurance plans that are cheaper.
Update your Marketplace insurance application as soon possible if your household income has changed. You may be eligible for additional savings or a lower monthly fee.