Auto Insurance Question

[CaramonLS]

This is happening right now to my current roomate - my question is, can they do this?

My buddy was paying 174$ per month for auto insurance, and ends up moving. They say that even though he is moving, using his car for less KMs (went from 15,000 per to 7500 per because he doesn't drive to work anymore), they are going to bump his rate because he no longer parks in a "protected driveway" to 190$ per year.

His response is "F that" and proceeds to call up my insurance co. (Meloche Monnex for the win), and they give him his insurance for 105$ a month.

He then calls to cancel his existing policy - however, they said he has to pay a "cancellation fee", because his "yearly policy" "automatically renewed" - this month in fact. He's been a customer with them for years.

Can they do that? Just ask for a cancellation fee?

[Antithesis]

I can't say I'm an expert here but my understanding is that you always purchase auto insurance annually, just they let you pay monthly. If this is the case, I'd imagine asking for a cancellation fee would not be an uncommon thing.

[RW99]

Yeah I don't know much about insurance policy cancellations

[puckluck]

Yes they can. It's written in your policy somewhere.

Most insurance companies have cancellation fees.

[BigBrodieFan]

Originally Posted by CaramonLS

This is happening right now to my current roomate - my question is, can they do this?

My buddy was paying 174$ per month for auto insurance, and ends up moving. They say that even though he is moving, using his car for less KMs (went from 15,000 per to 7500 per because he doesn't drive to work anymore), they are going to bump his rate because he no longer parks in a "protected driveway" to 190$ per year.

His response is "F that" and proceeds to call up my insurance co. (Meloche Monnex for the win), and they give him his insurance for 105$ a month.

He then calls to cancel his existing policy - however, they said he has to pay a "cancellation fee", because his "yearly policy" "automatically renewed" - this month in fact. He's been a customer with them for years.

Can they do that? Just ask for a cancellation fee?

I read your question and I was just yakking to my mom on the phone. She's been an insurance broker in Canada for 40 years. She said, yes, they can- it's in the fine print somewhere and cancellation fees are pretty standard. Sorry

[Travis Munroe]

Just pay the fee but try to negotiate it for them sticking it to you on the rate. Explain exactly why you are leaving!

[macker]

http://www.finance.alberta.ca/public...olicy_2007.pdf

Page 19 : Section on Termination. He is not fulfilling his one year contractual obligations so the insurance company is within their rights to offer a "short rate cancellation" and this means that there is a small penalty (likely $100 to $150?) and they don't have to offer the cancellation on a pro-rata basis. This is taken from the SPF #1 (Standard Auto Policy).

Based on the realized savings the cancellation fee, or short rate cancellation penalty, would be covered after two to three months so breaking the contract likely still makes sense.

[Finny61]

Basically just what Macker has pointed out, it is a short rate cancellation or penalty for opting out of a contract mid term. Standard process, it is not just one particular company trying to screw the customer around.

Not sure about the "protected driveway", I don't know much on how it runs in Alberta but in other provinces the insurance companies have rating territories (usually determined by postal code) and statistics are drawn from each territory or district. It factors into the premiums charged (just one segment, there are other factors such as vehicle details).

[sparky69]

If he wants to change insurance company, do what i have done in the past, just decrease your coverage to the minimum amount that they will let you. usually that will be fire and theft. then just go to the new insurance company and do full coverage

[ken0042]

^^ What happens if you have a fire or theft claim? I could see a nice battle between insurance companies debating who pays; meanwhile you are without a car.

[puckluck]

Originally Posted by sparky69

If he wants to change insurance company, do what i have done in the past, just decrease your coverage to the minimum amount that they will let you. usually that will be fire and theft. then just go to the new insurance company and do full coverage

This is a pretty good way to screw yourself as you are not allowed to have a vehicle insured by two companies and doing so voids both insurance contracts.

Meaning you will not be covered no matter what happens.