Jeffrey Wade
In the context of auto insurance, the term in force is used to describe a policy that is currently active and providing coverage in return for premiums paid as agreed. This means that the policyholder has been making payments according to the agreed-upon payment schedule, and as a result, the insurance company is obligated to honour the policy's terms and cover any valid claims.
For example, if you have liability insurance that is in force, it could help cover legal costs if your company is sued for an incident covered by the policy. Keeping your auto insurance policy in force is crucial to ensure you are protected in the event of an accident or incident.
| Characteristics | Values |
|---|---|
| Definition | An insurance term that means a policy is currently active and providing insurance coverage in return for premiums paid as agreed |
| Application | Applicable if a policyholder has been paying their insurance as per the payment agreement or has paid their premiums in full |
| Entitlement | When a policy is deemed in force, the policyholder is entitled to the policy's benefits |
| Lapse | If a policyholder misses premium payments, the policy will lapse and become inactive |
| Reinstatement | In many cases, if a policy lapses, the policy can be reinstated depending on the company's stipulations |
What You'll Learn
What does 'in force' mean?
When it comes to auto insurance, the term "in force" is used to describe a policy that is currently active and providing coverage. This means that the policyholder has paid their premiums as agreed, and the insurance company is obligated to honour the policy's terms and pay out claims.
Being "in force" is important for insurance policies as it confirms that the insured has met their payment obligations, and in return, the insurance company must adhere to the agreed-upon terms of the policy. This provides peace of mind and financial protection for the policyholder, knowing that they are covered in case of any insured events.
For example, if a policyholder has liability insurance that is "in force", it means that the insurance company will cover legal costs if the policyholder's company is sued for an incident that is covered by the policy. This demonstrates the practical implications of having an "in force" policy, providing essential financial support when needed.
To maintain an "in force" status, policyholders must pay their premiums promptly and adhere to the terms and conditions of the insurance policy. Regular policy reviews and compliance with risk management requirements are also crucial to keeping the policy active.
In the context of life insurance, the term "in force" is widely used. It indicates that the policy is active and has been paid for by the policyholder. As long as the premiums continue to be paid, the life insurance policy remains "in force". This is significant because it ensures that the policyholder's beneficiaries will receive the intended financial benefits in the event of their passing.
In summary, "in force" in auto insurance means that the policy is active and providing coverage, with the insurance company obligated to honour claims. This status is maintained by timely premium payments and compliance with policy terms, ensuring continuous protection for the policyholder.
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How does 'in force' apply to insurance companies?
When an insurance policy is "in force", it means that the policy is active and the insurance company must pay out claims according to the policy's terms. This means that the policyholder has paid their premium and is entitled to the policy's benefits. For insurance companies, the term "in force" is used to indicate the total amount of coverage they have issued to policyholders.
For example, if an insurance company states that they have a total of $2 billion of life insurance in force, they are saying that they have issued enough current life insurance policies to reach a sum total of $2 billion worth of coverage. This claim is only true if all policyholders have paid their premiums and maintained active coverage. If a policy lapses due to non-payment of premiums, it becomes inactive and is no longer considered "in force". In such cases, the insurance company would have to subtract the value of the lapsed policy from their total in-force amount.
Insurance companies use the term "in force" to demonstrate their financial strength and stability. By showcasing the total amount of coverage they have in force, they build trust and confidence with prospective clients, assuring them that they are financially secure and capable of paying out claims.
Additionally, the term "in force" helps insurance companies gauge their size and performance. It allows them to assess their financial obligations and ensure they have sufficient funds to honour their commitments.
To maintain policies in force, insurance companies must ensure that policyholders pay their premiums promptly, adhere to policy terms, and conduct regular policy reviews. By doing so, insurance companies can uphold their contractual obligations and provide continuous protection to their clients.
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How does 'in force' apply to policyholders?
An "in force" insurance policy is one that is active and providing coverage. This means that the policyholder has paid their premium, and the insurance company is obliged to pay out any claims according to the policy's terms.
For policyholders, an "in force" policy means that they are entitled to the policy's benefits. For example, if a policyholder has an "in force" liability insurance policy, it could help cover legal costs if their company is sued for an incident covered by the policy.
To keep a policy "in force", the policyholder must pay their premiums promptly and adhere to the policy's terms. If a policyholder fails to pay their premiums, the policy will lapse and become inactive, meaning the coverage is no longer "in force". However, some policies may have a grace period during which the policyholder can make the required premium payment to reinstate coverage without needing to reapply for a new policy.
It is important for policyholders to understand the terms and conditions of their insurance policy to ensure that it remains "in force" and provides the intended coverage. This can be done by monitoring premium payments and reviewing the policy regularly.
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What happens if a policy lapses?
A car insurance policy lapse happens when you could not renew your insurance plan on time. Here are some things to keep in mind if your policy has lapsed:
Contact your Insurance Agent
If you have missed your car insurance policy renewal date, get in touch with your insurance agent to discuss your further actions. They will be in a better position to provide you with assistance in such cases. Your agent can help you reinstate your policy and save you from facing any penalty.
Avoid Driving your Car
If your policy has lapsed, do not drive your car unless you renew your plan or buy a new one. Driving without insurance could put your car at risk as you cannot ensure its safety on the road. No matter whose fault it would be, it can cause minor to major damages to your car that would not be covered by your policy. Therefore, it is advised not to drive your car until you have renewed or replaced your insurance.
Buy a New Insurance Policy
If your insurance company has cancelled your car insurance policy due to non-payment of a policy premium, you will have to renew your expired car insurance plan. It is recommended to avail the option of online car insurance policy renewal, which can get your plan renewed in a few minutes if your insurance provider offers this facility. Many insurance companies offer affordable car insurance online.
Check for a Grace Period
Sometimes, insurance companies offer a grace period to pay the premium and renew your policy after the due date. This grace period can range up to 90 days with or without any late charges or penalties.
Contact your Insurer
In the case of a lapsed car insurance policy, immediately contact your insurer and check on all the available options for car insurance renewal. In some cases, insurers might allow you to renew the policy when the lapse is only a few days, or else they will advise you to apply again for a fresh policy.
Compare Different Insurers
While applying for a fresh policy after an insurance lapse, check the plans offered by different insurers and compare them based on the features offered and the premium rates.
Keep Previous Policy Details Handy
You must have all your previous policy documents and details of any past car insurance claims, as well as mandatory car documents such as registration certificate (RC), pollution under control (PUC) certificate, and driving license (DL) ready.
Check for No-Claim Bonus
Your insurer will review and decide whether you are entitled to a ‘No-claim bonus (NCB)’ or not on your fresh policy. Insurers often grant this request, so it pays to check.
Act Quickly
The premium offered by the company may be valid only for a limited time (typically 24 hours), so make a final decision within this period.
Prevent Future Lapses
To prevent future lapses, set reminders on your phone or calendar to renew your policy before the due date.
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How can a lapsed policy be reinstated?
A lapsed auto insurance policy can be reinstated, but the process depends on the insurance provider and the laws of the state in which the policy was issued.
If the policy lapsed due to a missed payment, the insurance company may offer a grace period, typically ranging from 10 to 20 days or sometimes up to 30 days, during which the policyholder can make the payment and avoid a lapse in coverage. Some insurers may also allow for a brief grace period after the official lapse, especially if the driving record while on the policy was good. If the payment can be made within this grace period, the policy can be reinstated, though a late payment fee may be charged.
If the grace period has passed, the policyholder should contact their insurance provider to see if reinstatement is possible. Some insurers will allow reinstatement for lapses of less than 30 days, but this may depend on the company's rules, the length of time that has passed, the policyholder's history with lapsed insurance, and the state's laws. Reinstatement will require paying the missed premium along with any reinstatement fees. The policyholder may also need to sign a no-loss statement, confirming that no accidents or damages occurred during the lapse. Since the lapse will be on the policyholder's insurance record, the insurer may reassign them to the high-risk driver category and increase their premium.
If the original insurance provider does not allow reinstatement, the policyholder will need to purchase a new policy, either with a different insurer or by initiating a new policy with the same insurer, if allowed. A new policy will likely be more expensive, and the policyholder may be required to file an SR-22 for several years, resulting in added expenses.
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Frequently asked questions
"In force" means that an insurance policy is active and providing coverage. This means that the insured has paid their premium, and the insurance company is obliged to pay out a claim as per the policy's terms.
A lapsed policy is inactive, usually due to non-payment of premiums. The insurer is no longer obliged to pay out claims. A policy can be reinstated if payments are brought up to date within a certain time frame.
To keep your auto insurance policy "in force", you must pay your premiums promptly and adhere to the policy's terms and conditions. It is important to review your policy regularly to ensure that it remains in force.
