Can Your Car Insurance Company Send You to Collections If You Don’t Pay Your Bill?

Last Updated on May 13, 2021

Late bill payments are never a good thing. What happens if you don’t pay your car insurance premiums? Can your car insurance company send you to collections? Will you ruin your credit score when you miss an insurance payment? Today, we’re explaining everything you need to know about whether or not your car insurance company can send you to collections if you don’t pay your bill.

Yes, Car Insurance Companies Can and Do Send Customers to Collections

When a car insurance company cannot collect funds owed to them, they may send your account to collections.

Collections agencies are businesses that recover money owed by individuals.

If your insurance company has sent your account to a collections agency, then they will likely notify you in advance. You might receive written notice that your account is past due and has been sent to a collections agency.

Typically, your insurance company will send you multiple warnings before sending your account to collections. Many insurance companies have a grace period – so if you’ve just missed your payment for 3 or 4 days, then your account is unlikely to be sent to collections. However, don’t assume this is the case with your insurance company.

Your insurance company will likely try to collect the debt from you for a period of 1 to 6 months. After this period, the insurance company will give up and send your account to an insurance collections agency.

How Will a Collections Agency Collect the Money?

Collections agencies use a number of tactics to collect money owed to companies by individuals.

As soon as your account gets sent to an insurance collection agency, you’re responsible for settling the debt with the collections agency – not your insurance company.

Ideally, you’ll make the payment to the insurance collections agency in full immediately.

However, if you cannot make the payment in full today, then you can set up a payment plan with your collections agency. Request a copy of the payment plan in writing, then make sure you continue making payments on time.

One popular tactic used by collections agencies is to list your unpaid account on your credit report. This can negatively impact your credit score for years into the future – even after you’ve paid the collections agency. Some credit scoring systems (including newer models like FICO 9 and VantageScore 3.0) ignore debts that have been paid. Older models, however, do not.

If you don’t pay your debt, then your case will likely end up in court.

Don’t Ignore an Insurance Collections Notice

You might have received several notices from your car insurance company explaining that your account is going to collections. Then, if you continue to ignore these notices and avoid making a payment, you might receive a letter from the insurance collection agency. That letter will typically say you have 30 days to respond.

It’s a bad idea to ignore this letter. The insurance collections agency will initially list your unpaid account on your credit score in an effort to get you to repay.

If that fails, and you continue to ignore the letter, then you may end up in court. At this point, you’ll receive a court summons. Lawsuits for collections accounts are a very common and popular way to get a payment.

It’s a bad idea to ignore a letter from your collections agency, but it’s an even worse idea to ignore a court summons about debt. These lawsuits can lead to wage garnishment (where your unpaid bills are automatically deducted from your paychecks), a bank levy, or even a lien on your property.

Does My Car Insurance Debt Ever Expire?

One final thing to note is that each state has a statute of limitations for debt. After a certain period, you can no longer legally be sued to pay that debt.

The debt never expires, and the collections agency can still contact you about that debt. However, they can no longer sue you for that debt.

The statute of limitations on debt is as short as three years in some states and as long as 10 years in others.

Final Word on Insurance Collections

Ultimately, your car insurance company is providing a service to you. You are paying for that service. When you miss a car insurance payment, you might suffer severe consequences. First, your car insurance coverage might lapse, leaving you without legal coverage on the road. Second, your car insurance company might send your account to a collections agency, which could mean severe effects on your financial future.

Fortunately, car insurance companies will not immediately send your account to collections within days of a missed payment. Instead, most companies will provide you with multiple notices that threaten to send your account to a collections agency over a 3 to 6 month period. Your insurance company is not bluffing: they will legitimately send your account to a collections agency if you don’t pay. The easiest solution, as you might expect, is to pay your debt as soon as possible.