Insurance Coverage: Does It Carry Over?

Whether your insurance carries over depends on the type of insurance you have and the circumstances. In general, car insurance follows the car, not the driver, and health insurance deductibles don't transfer from plan to plan. However, some health insurance plans include a carry-over provision, which allows policyholders to apply a portion of their current year's claims to the next year's deductible, reducing their out-of-pocket expenses. This typically applies only to expenses incurred in the final three months of the current year. Additionally, if your insurance plan renews mid-year, your deductible will reset on that date rather than at the beginning of the calendar year.

Health insurance deductible carryover

A carryover provision, also known as a fourth-quarter deductible carryover, is a clause commonly found in health insurance contracts. This provision allows policyholders to reduce their out-of-pocket expenses for the following year by applying a portion of the current year's claims to the next year's deductible. This typically applies to expenses incurred in the final three months of the current year, and it results in higher insurance premiums.

For example, if a policyholder has a $1,000 deductible and incurs $2,000 worth of medical expenses in a year, a carryover provision would allow them to apply a portion of the excess $1,000 towards the next year's deductible, reducing their out-of-pocket expenses. Carryover provisions are often included in employer-sponsored health insurance plans and Flexible Spending Accounts (FSAs).

When an individual switches from one health plan to another during the policy year, the amount they have already paid towards their deductible usually does not transfer to the new plan. In most cases, they will need to start over with a new deductible. However, there are some exceptions to this. In certain circumstances, such as during an employer's open enrollment period or due to extenuating circumstances, a deductible carryover credit may be established. Additionally, some insurance companies may make exceptions when an enrollee switches between plans offered by the same insurer.

It is important to note that health insurance deductibles generally reset either at the end of the calendar year (January 1st) or the end of the plan year (the anniversary date of the plan's original effective date or its renewal date). This reset occurs regardless of when an employee joins the plan, and the deductibles are not prorated for mid-year enrollees.

Car insurance carryover

Car insurance generally follows the car, not the driver. This means that if you borrow someone else's car and get into an accident, your auto insurance rates are likely to rise, not the car owner's. However, there are exceptions to this rule, and it's important to understand when car insurance follows the car and when it follows the driver.

When Car Insurance Follows the Car

In most cases, your car insurance will cover you and anyone else driving your car. This is known as "permissive use", which means you give someone permission to operate your vehicle, even if they are not listed on your car insurance policy. However, anyone who regularly drives your car should be listed as a driver on your policy. This includes family members and roommates who live with you and drive your vehicle. It's also important to note that how much coverage a person driving your car receives can vary by insurer and state.

When Car Insurance Follows the Driver

There is one notable exception to the rule that car insurance follows the car. If you rent a car for personal use, your insurance on your own car will typically extend to the rental car. In this case, your car insurance will follow you as the driver, rather than the car. However, it's important to check your existing policy to ensure it includes the necessary coverage types, such as liability, collision, comprehensive, and personal injury protection.

Transferring Insurance to a New Car

When you buy a new car, you will need to get it insured before driving it. You have the option to transfer your existing insurance policy to the new car or cancel it and start a new one. It's important to consider your needs, the policy terms and conditions, price, and deductible before making a decision. Contacting your insurance agent and providing them with the necessary information about the new vehicle will help ensure a smooth transfer.

Reducing Insurance Coverage Temporarily

If you're not planning on driving your car for an extended period, you may consider reducing your insurance coverage. While most insurance companies do not allow you to temporarily suspend your insurance, they may allow you to reduce your coverage to comprehensive-only insurance, also known as storage or seasonal insurance. This option can help you limit costs and avoid a gap in coverage while still protecting your vehicle from damages not related to an auto accident. However, keep in mind that you will be personally responsible if you drive without liability insurance, and you may not be eligible for comprehensive-only coverage if you have an auto loan or lease.

Switching health insurance plans

Health insurance is complicated, and it can be tricky to switch plans without losing certain benefits. Generally, once enrolled in a health insurance plan, you are expected to keep it for the year unless you qualify for coverage elsewhere, such as through a new job. However, there are certain windows of opportunity to change your plan.

Open Enrollment Period

The Open Enrollment Period is the time of year when anyone can change their health insurance plan, for any reason. It typically runs from November 1 to either December 15 or January 15, and the plan you choose will begin on January 1 or February 1, depending on when you enroll. During this period, you can shop around for a new plan with your current insurance provider or a different provider.

Special Enrollment Period

Outside of the Open Enrollment Period, you can only change your health insurance plan during a Special Enrollment Period. This is triggered by specific life events, including:

• Getting married, divorced, or legally separated
• Giving birth or adopting
• Starting, ending, or losing a job
• Losing health insurance coverage
• A death in the family
• Moving to a new ZIP code or county
• Having a baby
• Changes to your income

If one of these events applies to you, you will usually have 60 days to switch to a new plan or make changes to your existing one.

Deductible Credit Transfers

If you have paid towards a deductible and then switch plans, some companies will allow that paid portion to be transferred to the new plan. This is called a deductible credit transfer. However, this is not a common practice, and it is not mandatory for insurance companies to offer this. It also requires the employee to submit additional paperwork.

Cancelling Your Health Insurance Plan

You can cancel your health insurance plan at any time, although if you get your insurance through an employer, you may have more limited choices. You will usually need to fill out some forms to make the cancellation official, and you may need to wait until the next Open Enrollment Period to enroll in a new plan. It is important to ensure you have alternative plans in place for your medical care, as you cannot usually enroll in a new plan straight away outside of the enrollment periods.

Cancelling insurance policies

Cancelling an insurance policy is a relatively straightforward process, but it's important to be aware of the potential consequences and follow the correct procedures to avoid fines and increased premiums in the future. Here are some key things to know and consider when cancelling an insurance policy:

Reasons for Cancelling

There are several valid reasons for cancelling your insurance policy, including:

• Switching insurance companies for a better deal.
• Moving to another state or out of the country, where your current insurer may not offer coverage.
• Selling your car and no longer needing insurance (although you can keep your insurance if you're driving a different vehicle).
• Being covered under someone else's policy.

When Not to Cancel

In some cases, it may be more beneficial to amend your policy or speak to an agent about alternative options, rather than cancelling your insurance altogether. For example:

• If you're only temporarily not driving, you may be able to suspend your insurance or reduce your coverage instead of cancelling.
• If you're moving, your current insurer may be able to transfer your coverage to your new state, so it's worth contacting them to discuss your options before cancelling.
• If your premium is high, you could look into discounts or other ways to reduce your rate, rather than cancelling your policy entirely.

How to Cancel

The process for cancelling your insurance policy will vary depending on your insurance company and state requirements. Here are some general steps to follow:

• Purchase a new policy before cancelling your existing one to avoid a lapse in coverage, which could increase your future rates.
• Contact your insurance provider to inform them of your intention to cancel. You may be able to do this by phone, mail, email, or in person.
• Ask to speak with an agent about any specific requirements for cancelling, such as cancellation fees or notice periods.
• You may be required to sign a cancellation letter or form, providing details such as your policy number, name, and desired cancellation date.
• Request a policy cancellation notice from your insurer for your records.

Refunds and Fees

If you've paid your premium in advance, your insurer may issue a prorated refund for the unused portion of your policy. However, some insurers may also charge a cancellation fee, especially if you're cancelling before the end of the policy term. Be sure to review your insurance contract and check with your insurer to understand their refund and cancellation policies.

Reducing insurance coverage

Auto Insurance

When it comes to auto insurance, there are several ways to reduce coverage:

• Reduce policy limits: Lowering the maximum amount that an insurer will pay out for a covered loss.
• Drop unnecessary types of coverage: For example, if you own an old car that isn't worth much, you might consider dropping collision and comprehensive coverage.
• Increase your deductible: The deductible is what you pay before your insurance policy kicks in. By requesting a higher deductible, you can lower your costs. For instance, increasing your deductible from $250 to $500 could reduce your collision and comprehensive coverage cost by up to 30%.
• Buy insurance-friendly cars: Cars with lower value, lower body type, and lower theft rates are cheaper to insure.
• Reduce mileage: Insurers take your annual mileage into account when calculating your premium, so consider carpooling, riding your bike, or using public transportation.

Home Insurance

There are also ways to reduce coverage on home insurance:

• Increase your deductible: Similar to auto insurance, raising your deductible will reduce your premium.
• Skip small claims: It may be better to pay out of pocket for smaller expenses, as some insurers offer discounts for remaining claim-free for a certain period.
• Drop coverage: Dropping certain types of coverage can be risky, but it may make sense to drop collision or comprehensive coverage for older homes or cars.

It is important to carefully review any changes to your insurance policy and consider the potential risks of reduced coverage. While it can lower costs, it may also leave you vulnerable in the event of a claim.

Frequently asked questions