It is sometimes the first resort of the desperate during Januworry but cancelling a debit order has long term – and possibly disastrous – implications.
While it may ease short-term cash flow concerns, summarily cancelling any debit order affects your credit score and can lead to you having to pay more for credit and insurance in the long-term, cautions short-term insurer MiWay.
That is why it is better to chat to your insurer and make arrangements if you suspect you may not be able to meet your obligations. The terms and conditions of most insurance policies stipulate that premiums be paid in advance.
If a debit order bounces because the policyholder has reversed it or there are not enough funds in their bank account, the policyholder has a 15-day grace period to make arrangements for the funds to be collected in order to have cover. So, if they have an accident, their house is burgled, or their cell phone or device stolen, and they have not made paid or any arrangements to pay the premium, they cannot expect compensation from their insurer.
The pain unfortunately does not end there, when reinstating a policy or taking up any future insurance policies, their history will be considered, and they may face higher premiums – meaning that even one missed month can have a big impact on your premium in the foreseeable future.
“The best scenario when facing a cash-flow crisis is for the policyholder to contact their insurer to see what arrangement they can come to. Reversing a debit order, or not ensuring there is enough money in your bank account as required, does not save you any money. It impacts not only your insurance cover, but also your credit score. Policyholders need to think carefully and plan properly to ensure the best outcome,” says MiWay.
MiWay is a Licensed insurer & FSP 33970. Ts & Cs apply.
— Arrive Alive (@_ArriveAlive) September 5, 2018