The Return Premium Process
Commercial truck insurance plays a crucial role in protecting trucking businesses from financial risks associated with accidents, damages, and liability. However, there may be instances where you need to remove a driver or unit from your policy. Understanding the concept and process of return premium help provide you with clear expectations on where your money goes when making changes to your policy and why your insurance premium changes.
Return Premium Caluclations
In the return premium process, insurance companies typically pro-rate the premium based on the remaining time left in the policy term to determine a refund amount. They calculate this refund based on the effective date of the driver or unit removal. If the removal is retroactive, meaning it is effective from a date before the request, the refund covers the unused premium from that retroactive date. However, if the effective date is the same as the requested date, the refund will cover the unused premium from that day forward.
Impact of Discounts
Any type of removal from your policy may result in the loss of any applicable discounts associated with what is removed. For example, if a driver has a safe driving record or belongs to a specific profession that qualified them for a discount, their removal could lead to an increase in the premium due to the loss of those discounts
Where Does the Refund Go?
Depending on how your policy is paid for (paid in full, direct billed, or premium financed), the refund amount may or may not go into your pocket. Unless you decide to pay your policy in full, the refund will most likely come in the form of a reduced monthly payment, not a check in the mail. It is important to also note that your insurance agency does not have access to this refund either, and in turn, can not provide you with a “refund check”.
Paying In Full
If you pay your insurance premium in full, the return premium will be calculated based on the remaining unused portion of the policy. This means that you will receive the refund, for you paid the entire policy amount.
Direct Bill Option
If your insurance provider offers a direct bill option, all statements are billed from/payments are made directly to them. In this case, your insurance company adjusts your future premium payments to reflect the new policy’s price along with your payment schedule. The return premium will be reflected in the new payment schedule, not as a refund check. You should receive a revised billing statement that reflects the updated premium and payment amounts. If you do not receive a statement, reach out to either the insurance company directly or your insurance agent.
Financing Through a Finance Company
When financing your insurance policy through a finance company, any removal may impact your payment schedule. Your insurance company calculates and sends any return premium owed to your premium finance company, for they paid for your policy in full. It typically takes between 8-12 weeks for the return premium to get from the insurance company to the finance company. Once received, the finance company may adjust the repayment plan to reflect the updated premium amount. Keep in mind that in most cases, the finance company will not make any adjustments until they receive that check from the insurance provider. This means that you are still responsible for making payments while they wait for the check/make the adjustment. Always contact both your insurance agent and the finance company with any questions regarding how the return premium will be handled.
Some policies incorporate minimum earned and/or fully earned clauses. For more details about these and to see if it applies, check with your agent.
Let Marquee Help
Understanding the concept and process of return premium is essential when considering when making changes to your insurance policy. When choosing Marquee Insurance Group as your agency, you choose a team that informs their insureds on all the available payment options. If you need guidance on your return premium process, reach out to one of our agents today at (833) RING-MIG.