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How to Lower Fees that Increase the Cost of Insurance Payments

Did you know that every insurance carrier attaches a fee to insurance payments made by check?

Insurance PaymentsHow you pay your insurance payments can mean dollars in your pocket.

Sometimes as high as $6 a payment!

When you are quoted a rate on your insurance, no matter if it is personal or commercial insurance, that rate will often not include fees associated with insurance payments.

Why Insurance Payments Have a Fee

Insurance carriers aren’t trying to be sneaky it’s just not part of the insurance premium… It’s literally an extra fee included in insurance payments based on your method of payment.

Insurance carriers do not want you making your insurance payments via physical check.  It takes more time and effort and with today’s technology there is a cost to the insurance carrier in processes a physical check.

Additionally, there is statistical proof that consumers who pay their insurance payments via physical check are more likely cancel for non-payment.

I can understand why you may not like paying these fees and you make not think that the fees are fair, but there is a method to the madness.  Let me explain…

There are Different Way to Pay a Premium

Every insurance carrier gives you a few different options to pay your premiums.  When you work with The Murray Group we help you understand the fees associated with different types of insurance payments to make an educated decision.

Here are some payment options that may be available through your current carrier.  The following is a generic list of options many companies provide:

  • Pay in Full
  • Bi-Annual
  • Quarterly
  • Monthly
  • Online Payment
  • EFT (Electronic Funds Transfer)
  • Escrow (Property Insurance)

Why Do Carriers Charge Payment Fees?

In my opinion, (I don’t work for a carrier and thus have no cardinal knowledge, see disclaimer below), there are two reasons why an insurance carrier charges payment fees: First, sending, receiving and processing hard copy checks takes time and the carrier has to pay admin staff to handle this function.

Second, the process of receiving a bill in the mail, writing a check, putting the bill back in the mail, the bill being received and finally processed and cashed by the insurance carrier is very Treacherous.

What I mean by Treacherous is there are so many places where the transaction can go awry and the payment can be forgotten, lost, misplaced, procrastinated upon, sent to the wrong address, incorrectly entered, etc, etc…

All these issues lead to your policy potentially being canceled for non-payment.  When you are canceled for non-payment, commonly known as a Lapse in Coverage, the insurance carrier has to go through the process of Reinstatement to get you coverage again.

On your end that process doesn’t seem like a big deal, but to insurance agents and insurance carriers there is a decent amount of work that needs to be done.

Sooooo… In an effort to drive people towards payment options that lead to less cancellation for non-payment insurance carriers charge higher fees for manual check payment and subsequently charge less for Online and EFT payments and often do not charge for Pay In Full.

The Rub

I have seen dollar amount differences of $6 per payment for manual check payments and $1 per payment for EFT.  That means if you choose the standard 10-pay manual check option for an Auto policy you pay $60 in payment fees versus only $12 for EFT.

As always its the insured’s call on payment option… But this seems like a No-Brainer to me.

Thank you,

Ryan Hanley

P.S. If you’d like to see if you’re paying too much in payment fees Click Here or call (518) 456-6688