Questions about policy cancellation

[Deimos]

Hi folks. My monthly premiums with State Farm were lowered because of my reaching 25 years old. I went from 384 to 130/month.

If I were to cancel my policy in October 1st, how would I calculate the balance owing (my renewal is April 1st)?

Also, in my recent invoice, they slapped a 140 dollar policy change on me to bring my bill to 270 for September. Is this normal practice when you get older mid way through a policy?

[TorontoBoy]

...Also, in my recent invoice, they slapped a 140 dollar policy change on me to bring my bill to 270 for September. Is this normal practice when you get older mid way through a policy?

Nov-Feb's premium is almost zero. Most of your yearly premium is biased towards the months you can ride. They allow you to pay the same each month for convenience. You probably will not get back very much.

As for the $140 charge, complain about it. This is pure evil. It is a month's worth of insurance premium. Is it your fault that you happen to turn 25? You should not have to pay this.

[jeffjones]

Here is thread about state farm's cancellation charges.

http://www.gtamotorcycle.com/vbforum...Penalty-Refund

[Deimos]

Nov-Feb's premium is almost zero. Most of your yearly premium is biased towards the months you can ride. They allow you to pay the same each month for convenience. You probably will not get back very much.

As for the $140 charge, complain about it. This is pure evil. It is a month's worth of insurance premium. Is it your fault that you happen to turn 25? You should not have to pay this.

I don't know, I still got 6 months left in my policy but my rate has changed. How is a refund or what I owe calculated is what I'm more concerned about. The policy charge really got me peeved

Here is thread about state farm's cancellation charges.

http://www.gtamotorcycle.com/vbforum...Penalty-Refund

I wouldn't have made this thread if that sticky addressed my particular concern. Thanks anyway.

[jeffjones]

Hi folks. My monthly premiums with State Farm were lowered because of my reaching 25 years old. I went from 384 to 130/month.

If I were to cancel my policy in October 1st, how would I calculate the balance owing (my renewal is April 1st)?

I don't know, I still got 6 months left in my policy but my rate has changed. How is a refund or what I owe calculated is what I'm more concerned about. The policy charge really got me peeved

I wouldn't have made this thread if that sticky addressed my particular concern. Thanks anyway.

That is exactly what is discussed in that thread and even has a calculator in it to get the exact answer you are looking for?????

As for the rate change, did they give you a new policy?? As I thought rate changes are only made at renewal's??

[Deimos]

That is exactly what is discussed in that thread and even has a calculator in it to get the exact answer you are looking for?????

As for the rate change, did they give you a new policy?? As I thought rate changes are only made at renewal's??

Hmmm, I may not be doing this right so bear with me.

My payments for 6 months were 384/month before my turning 25. After that, my rate changes to 130/month for the next 6 months until my renewal (April 1st).

So my annual premium is: (384 x 6) + (130 x 6) = 3084.00

If I cancel October 1st, Statefarm owes me 362.80 since I will not use the last 6 months left in the policy?

It's the same policy as far as I'm concerned.

[GreyGhost]

Hmmm, I may not be doing this right so bear with me.

My payments for 6 months were 384/month before my turning 25. After that, my rate changes to 130/month for the next 6 months until my renewal (April 1st).

So my annual premium is: (384 x 6) + (130 x 6) = 3084.00

If I cancel October 1st, Statefarm owes me 362.80 since I will not use the last 6 months left in the policy?

It's the same policy as far as I'm concerned.

I think you've got this all wrong.

Based on what you have said:
1) Your year with statefarm runs from April 1 to Mar 30.
2) Your original yearly rate was 4608 (384*12)
3) Your new yearly rate is 1560 (130*12)
4) You turn 25 on October 1
5) I am ignoring the $140 charge as I have no idea how it fits into this mess

Using Vifferfuns calculation sheet, you used up ~$3686 worth of policy while at the higher rate while paying $2304 leaving you owing $1382 for the period that has passed. For the next 6 months, using the new rate of $1560/yr and paying $130/mo, you would use up $312 of coverage while paying $780. As of the end of your policy (April 1), you should pay statefarm an additional $914 (1382-780+312). If you cancel october 1, they will want (and deserve) a cheque for $1382.

You are averaging far too much in your assumptions and have lost the monthly differences that are present in the policies. You aren't the first person and you won't be the last to get confused by statefarms equal billing.

[VifferFun]

Also, in my recent invoice, they slapped a 140 dollar policy change on me to bring my bill to 270 for September. Is this normal practice when you get older mid way through a policy?

State Farm is not obligated to adjust your rate in the middle of a policy term just because you turned 25yo. Your premium reduction is not supposed to occur until your renewal in April 2012. What exactly was the $140 charge for? My guess is that it isn't a service fee, but perhaps an adjustment of some sort.

[VifferFun]

The calculation of premium owing at October 1, 2011 doesn't depend on the rate that premium is "used up" in the second half of the year, since the OP will not have "used up" any of that premium yet. The calculation of premium owing at October 1, 2011 is pretty straightforward (assuming the $140 fee is a payment against the policy):

Premium Owing @ Oct 1, 2011:
= (Used Up @ Oct1) - [Paid @ Oct1]
= (0.80 * $4608 ) - [($384 * 7) + $130 + $140] -- b/c he would have paid first and last up front
= $3686.40 - [$2688 + $130 + $140]
= $728.40


Now, it's a little more tricky (and interesting!) to calculate the *actual* new premium being charged to the OP in the second half of the year. The OP's level payments of $130/mo for the remaining five months of the policy do not reflect the actual premium charged, since the payment of $130/mo is also amortizing the balance owing from the first half of the year. It is my guess that the OP's new monthly premium is $90/mo (i.e. when he renews on April 1, 2012, it should drop to about $90/mo).


In order to calculate this new monthly premium (call it X), I backed into it with some Grade 9 Algebra knowing that the policy will be 100% paid by the end of the policy term and also assuming that the $140 adjustment was a payment against the policy. In order for the numbers work out, I also had to assume that State Farm is giving the OP the 25yo rate starting September 1, 2011 (which is quite possible):


Total Paid Premiums @ March 31, 2011
= ($384 * 7) + ($130 * 5) + $140 -- b/c he would have paid first and last up front
= $2688 + $650 + $140
= $3478

Total "Used Up" Premiums @ March 31, 2011
= ($4608 * 0.68 ) + ($X * 0.32) -- assuming that he was given the 25yo rate beginning Sept 1
= $3133.44 + $0.32X

A little bit of Algebra to determine X:
Balance Owing @ March 31, 2011 = $0 (this is a fair assumption)
(Used Up @ Mar31) = (Paid @ Mar31)
$3133.44 + $0.32X = $3478
$0.32X = $3478 - $3133.44
$0.32X = $344.56
X = $(344.56 / 0.32)
X = $1076.75

Thus, the OP's premium when he renews on April 1, 2011 should be about $1077/yr (or $90/mo). Of course, this will go up or down depending on when State Farm started giving the OP the 25yo rate. Now isn't this fun?

OP, you should contact your agent to ask them what your new annualized premium is, just to verify. In other words, if you were to purchase a second identical bike, what would the annual premium be?

I hate State Farm's premium earning method because it's impossible for a layman to understand.