The world of insurance can often appear very intimidating to a complete newcomer. Granted, we are all aware we live in a very uncertain world and want to keep ourselves and our loved ones secure in case of some unpredictable situation. But, the lack of knowledge about these policies often prevents us from using the otherwise favorable arrangements to our full advantage.
One of the topics that probably cause the biggest confusion is the possibility of insurance refund and how these refund works when applied to the different types of policies. Let us take a look then if we can make some of these things a bit clearer and make sure you are paying only for the policies you are going to use.
If you are not familiar with the term, gap insurance, as the name suggests, represents the policy aimed at covering the difference in the price of your vehicle from the purchase to the moment you charge the insurance. If your car gets totaled, the insurance company will cover only the market value of the vehicle at the time of the accident, which is usually not enough to cover the loan you raised to buy the vehicle. Gap insurance makes sure that’s not the case.
Some people, however, are not aware that if you pay off the vehicle before the end of the term, you can ask for a partial gap insurance refund. This refund will work based on the type you have paid off the loan:
- Lump-sum payment – If you pay the policy in advance, you get a refund on the unused portion of the insurance
- Monthly payments – If you pay the insurance premiums monthly you will get a small refund if you cancel the arrangement early in the month
Unlike all other policies we will cover in the article, junk insurance is entirely exploitative in nature and serves you no purpose whatsoever. That doesn’t prevent some insurance companies from trying to stack your insurance agreement with clauses and policies you won’t ever be likely to use. In strictly legal terms, such practices are considered unethical so you are allowed to make official inquiries on how to get junk insurance back without any special pretext. So, if you at any moment feel you have been a victim of this dishonest practice don’t be afraid to ask for legal help and demand a full junk insurance refund.
Car insurance policy
In normal cases, the traditional car insurance is not eligible for any kind of refund unless the policy is paid in advance or canceled before the term ends. Although the latter situation is not recommended due to increased premiums on your next insurance, you may want to do this in the case of moving or switching the insurance company.
However, some changes to the policies may qualify you for a credit on your account for a partial refund. In most cases, those would be:
- Decreasing policy limits – Higher insurance coverage entails higher premiums. This works both ways so if you downgrade, you should get some money back.
- Removing a vehicle – Removing one vehicle from the policy should typically decrease rates and cause a refund
- Removing coverage – For instance, once your vehicle starts depreciating at a faster pace, you may no longer need comprehensive and collision coverage
- Changes to the agreement – If the insurance company makes any one-sided change to the old insurance agreement (e.g. adjusting premiums to inflation) you are allowed to ask for some kind of compensation.
Last but not least, let us quickly cover one more very popular insurance policy – life insurance. That shouldn’t be that big of a problem since, even though the name of this package implies a lifelong term, life insurance covers can if you choose so, cover only a limited period of time, typically 20 or 30 years. If you outlive the term of the policy, the insurance company is obliged to refund you exactly what you have paid with no additional interest rates. The downside of these premium life insurance policies is that the premiums are often much higher. Traditional life insurance packages don’t feature such refund clauses whatsoever. If you cancel the policy you won’t get any of the money back.
We hope these few considerations how some of the most popular insurance policies work and in what cases you are eligible for a refund. While most of these products are designed to help us and our families to more easily deal with various life hardships, paying more won’t always lead you to better outcomes. In some cases, you will simply keep pouring money down the drain without ever knowing it. This short article should help you untangle at least some of these complex situations.