Short Rate Penalty in NC

[gogogirl]

I found insurance for much cheaper than I am paying now but my agent says if I cancel my insurance with them now I will have to pay a "Short Rate Cancellation" Penalty. What if I just let the policy lapse and they cancel it? Am I still liable for the "Short Rate Cancellation" Penalty?

 

[Juan Rodriguez]

Your answers are,"no" and "it depends". A short rate cancelation is calculated when the "insured requests the cancelation". It is 10% of the pro-rated factor. If you have a brand new policy and let the coverage lapse for non-payment of premium then the more you get back as opposed to when you request the cancelation and the refund is calculated on a short rate. The longer you have had the policy and the more payments you make then less you get back if you just stop paying. So, if you've had the policy a while it may be cheaper to do the short rate.