Electronic Funds Transfer for Insurance Payments
Some things in life are fun – but remembering to pay your bills certainly isn’t one of them.
If your financial situation allows, a “set it and forget it” method of bill payment, including to your insurance company for premiums, may be a much better option than going through the hassle of paying through the site every month, and more and more companies offer incentives for doing so.
An electronic funds transfer, also known as EFT, is the transfer of funds from your credit card, checking, or savings account to your monthly bill. Insurance companies love electronic funds transfer because they know exactly when their payment will be received. EFT payments are recommended; however, caution should be used when it comes to automatic payments.
Pros of EFTs
Set It and Forget It: The great thing about an electronic funds transfer is you can set it up one time and all future payments are set. Payments will be taken out of your account on the same day of every month. No more writing out a check and paying for postage, or trying in vain to find the password for a website you use only once a month. Using your routing and account number from your checking or savings account is preferred over a credit card because credit cards need their expiration dates updated periodically. Pretty much all insurance companies offer EFT payments, and it is the favored method of payment besides paid in full. Ask your insurance agent what forms of EFT are allowed with your carrier. Some companies limit your options to just checking accounts.
Save on Payment Fees: Insurance companies often charge payment fees when paying monthly payments through the mail. Payment fees can range in cost from $3 up to $10 depending on your insurance carrier. Typically, the fee will be waived if your account is set up for electronic funds transfer. Plus, you will never have to worry about a late payment fee, if your payments are set up on automatic withdraw.
EFT Discounts: On top of saving on payment fees, some companies even give an additional five percent discount for having your payment automatically withdrawn from a checking or savings account. It is a great incentive to sign up. It is usually not as good as a paid in full discount, but every bit helps with the high cost of insurance. Ask your insurance provider if any discounts are offered for setting your payments up for EFT.
EFT Pitfalls to Avoid
Switching Banks: Don’t get tripped up by switching banks and not notifying your insurance company. If your bank account has been closed, the insurance company cannot withdraw the payment. This can cause big problems. Your payment plan can get messed up, or even worse, your policy could get canceled if you do not catch the mix up in time. It might be helpful to keep a list on your computer of all the bills that come out of your account monthly so that you can easily notify them all in the event that you do switch bank accounts.
Switching Insurance Companies: A lot of things happen all at once when buying insurance. Canceling your prior insurance does not necessarily give the insurance company time to stop your withdraw. You need to specifically request removal from the electronic fund's transfer as soon as you know you are switching. A lot of times, it takes a couple of days for the removal to be processed, so you do not want to wait until the last minute. If you forget to request removal, have your bank account padded for an extra withdraw and you will be refunded the premium once your cancellation is processed.
Money Not in Bank Account: One of the downfalls of the electronic fund's transfer is that it's easy to forget. If the insurance company tries to pull money out of your account and not enough money is available, it is equivalent to writing a bad check. A bounced check is bad for everyone involved, especially you. The bank will charge you a fee and the insurance company charges an additional fee. Often, if you get multiple bounced payments, the insurance company will not reinstate your policy. Keep a very close eye on your bank account at all times, and always give yourself a cushion of extra cash to reduce the likelihood of a bounced payment.
If you have been doing electronic fund transfers on any of your other bills, definitely sign up with your insurance company. The incentives are good and the convenience is unbeatable. It does take some getting used to, but once you have adjusted to your new payment method you will wish you had made the change a long time ago. An electronic funds transfer is easy to set up, just call your agent or signup on your insurance carrier's website.