can auto insurance companies legaly charge a "penalty fee" for previous policy that has lower liability coverages? i recently changed insurance companies, paid the policy in full and now three months later they are saying that i owe an extra $200 as a penalty since my last policy had slightly lower liability. they also told me it would take 2 years for this "penalty" to disappear. what is the reasoning behind this and do all insurance companies do this?
Auto Insurance Penalty For Previous Policy
- Thread starter brigit
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- auto insurance
- 141
I wish someone would answer this question.
- 415
It's not that it is a penalty but your application indicated that you had higher BI limits then you actually did. Not that you will but if you read through the application it should state that the company has X # of days to review, change, modify, cancel...etc if the information that you provided differs from what they actually receive. This is called underwriting…and it happens all of the time. Not as often now with CLUE and LIS and Current Carrier Data base reports that are almost real time with most carriers…but occasionally we still get a call about an additional driver or information that did not match up.
Short answer is YES... they certainly can and will charge you more because you should not have gotten the rate that you did based on your prior insurance information.
Short answer is YES... they certainly can and will charge you more because you should not have gotten the rate that you did based on your prior insurance information.
- 141
Why do they rate it up based on prior coverage?
- 415
Because that is how companies determine what tier that you will go into. Most all carriers use prior BI limits, length of time with present carrier, just as well as your driving record, credit (in some states) if you own a home...etc...etc...
- 415
Are you serious? What underwriting questions do they ask where you are? MD, DE, and VA do.
Not trying to be a jerk but just currious what factors determine rates?
- 620
Some preferred carriers don't like to take a 15/30 clients from a non standard carrier and put them into a 100/300.
- 1,016
the company had every right to change your rate for reasons already mentioned. but with that being said, the increase should not have amounted to $200. that sounds quite excessive, especially since you had prior insurance, even if at a lesser level. the difference between someone with prior insurance and someone with no prior insurance at all usually doesn't amount to that much difference in premium. sounds to me like you should shop around.
the timeframe of 2 years is excessive also.
the timeframe of 2 years is excessive also.
- 1,473
U should shop around. The agent should have giving you the right amount.
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