What is an insurance premium refund? (with photos)

If a vehicle owner cancels their car insurance, they can receive a refund of the insurance premium.

An insurance premium refund is when all or part of an insurance payment is returned to the individual who made the payment. This type of reimbursement can be granted for several types of insurance, including car insurance, health insurance, life insurance, or private mortgage insurance. An insurer will normally never issue a refund without a written request from the named insured, so keep this in mind if circumstances have led to the possibility of an insurance refund.

An insurance premium refund may be issued for a life insurance policy.

The most common type of insurance premium refund occurs when insurance is purchased for a specified period of time, but the person who purchased the insurance chooses to cancel it before that period of time is over. This will only be possible if the insurance has not been used; if the insurer has paid any money on the policy for any reason, there is no chance of getting the insurance premium refunded. If the policy was purchased for one year, however, and the annual premium was paid in advance, and the individual then cancels the policy without having used it after a few months, he or she may be entitled to a prorated insurance premium refund. unless otherwise specified in the insurance documents.

An FHA mortgage insurance premium refund is another common example. This type of federal program allows individuals to buy a home without spending twenty percent, but they are required to purchase private mortgage insurance (PMI). The buyer must continue to pay the PMI until the home’s equity is at least twenty percent, at which time the PMI may be cancelled. If individuals reach twenty percent of the home equity before the expected period, they can usually apply for a partial refund of the private mortgage insurance premium.

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To be entitled to any type of insurance premium refund, it will normally be necessary to contact the company that holds the policy and request its cancellation. Generally, you need to complete and sign a form, and within a few days to a few weeks, you should receive a check for the prorated refund amount. This means that the full premium amount will not be refunded, only the amount that has not been “used” based on the term of the policy. This amount may be significantly less than the premium, but it is still worth checking with the company to determine eligibility.

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