Considering switching to Loop, but stuck in your current car insurance contract? Think again.
Loop is gearing up to go live selling car insurance, offering a product that is fair and transparent for more people. If you’re like most people considering Loop you probably already have a contract with Progressive, Geico, Allstate, or Statefarm.
You’re not locked in to your current contract. You don’t have to wait until your policy expires – which can be anywhere from 6 months to a year from now – to switch.
Insurance company functions like a bank. They accept a deposit, in this case your premium, paid up front, to cover the upcoming month or the entire length of your contract. They hold your cash and invest it, making about 4% on the invested premium.
Insurers hold premiums, but they “earn” it by day, after time has passed. If you decide to cancel before your contract expires, your insurer owes you the outstanding balance from the day you cancel, onwards.
How Does Cancelling My Insurance Policy Work?
So, let’s say you bought a six month policy and you paid the entire $846 upfront, or $141 per month. You’re two-months into your current contract and you cancel on the 15th day of the month to switch to Loop. You are entitled to a refund of $494 ($141 x 3.5 months) if you paid upfront or $79.50 ($141 x 0.5 months) if you’re paying monthly.
Insurance companies don’t advertise this information because they want to hold and invest your premium. But carriers are not like cell phone or cable companies where you are locked into your contract. You can have a six-month policy and cancel one month into the contract and bring your business elsewhere.
In the case of insurance, you, the consumer, has control about where you bring your business.