How do insurance policy renewals work?

Insurance Insights | October 3, 2017

How do insurance policy renewals work?

Over the years, we have noticed many of the same misconceptions about insurance cropping up, so we decided to create a quick and easy guide to your insurance.RenewalsInsurance policies typically provide coverage for one year and the renewal is the day coverage ends. Renewals are a critical part of any insurance policy and it’s probably the single most important date for your insurance. Because most insurance policies renew automatically, some customers leave their renewals on autopilot. However, it is very important to review your policy details before renewal.The way a renewal works is that insurance companies send us their options for our review. Then we contact customers to review the renewal with them and find out if they have had any changes in their lives that could impact their coverage and policy details.Life happens and things change, but customers aren’t always aware they must communicate these changes to their broker. We make sure all of our data is up to date and we amend policy details as needed. This is where endorsements come in.EndorsementsEndorsements are changes to your policy. Your policy may require changes if your life situation has changed, including an illness or death in your family, buying or selling vehicles, moving to a new address and so on.It’s crucial to inform your broker about such changes because they can impact your coverage and costs. For instance, moving just one block may place you in a higher risk area and increase your premium. If you’re purchasing a new car, we would need the make, model, year, and VIN to ensure a quick and painless endorsement.The more information we receive, the more we can do for you, including sourcing accurate quotes and estimates, and giving sound advice. Without detailed information, our options can be limited.It’s also important to be proactive. Give at least two days notice regarding any changes, and get quotes before requesting changes so that you can test the water.We have seen cases where a customer buys a new car and is satisfied with the monthly finance or lease payments only to discover a dramatic increase in their insurance premium when they ordered an endorsement.Some challengesCustomers understandably want real time information. However, as a broker, we don’t always have answers to their questions immediately at hand. When we carry out endorsements, we submit a request to their insurance company and wait to receive documents from them.Although we can issue a temporary endorsement confirmation, it’s the role of the insurance company to generate updated documents and make the changes official.

  • Billing

Billing almost always becomes a challenge following endorsements. Changes in the middle of the insurance term will impact the remaining payments. Adding a second car to your policy as mentioned above will increase all of the payments that come after the endorsement.The change in premium is prorated and divided by the number of payments left on the policy. This can make the increase seem much higher than it really is when there are fewer installments left on the policy. Customers are often not aware and have a hard time understanding this point.

  • Premiums

There is also a misconception that premiums are supposed to decrease every year.Even if your driving record remains unchanged and you have no claims, you’re not guaranteed a decrease at renewal.Insurance companies can change their rates and many factors lie outside the customer and broker’s control. That being said, we are always watchful for unwarranted increases which can sometimes prompt a move to a different insurer.

  • Loyalty

While cost is an important factor in purchasing insurance, some customers are overly concerned with the sticker price to the point where it begins to negatively impact quality. S jumping from one insurance company to another at every renewal is not a good idea because it prevents you from generating loyalty with a given insurer meaning you do not earn loyalty discounts.Moreover, insurance companies don’t look favourably on brokers who shop their customers around very often.

  • Reliable information

Everyone has their own network and we all rely on our friends, family and other connections for advice. However, customers must be mindful as to where they get their information from.Unless you’re speaking with a licensed insurance broker, most of your connections probably aren’t the best source for insurance information.It’s our responsibility to be honest and transparent with our customers and we would be remiss if we didn’t inform you.Do you know when your policy is due for renewal? Give us a call and let’s make sure your insurance is working for you.