Thinking of cancelling your State Farm policy? Want to know your Penalty/Refund?

[VifferFun]

Hi Everyone,

<<UPDATE! I HAVE ATTACHED AN EXCEL-BASED CALCULATOR FOR THE MATHEMATICALLY CHALLENGED >>

Time and time again, GTAM members ask me why they aren't allowed to cancel their State Farm policy (or drop to Fire and Theft only) for the winter without paying a "penalty". Although State Farm charges equal premiums every month, you actually "use up" the annual premium much faster over the Spring/Summer months than you do in the Fall/Winter. You are given the following copy of the State Farm premium-earning schedule with your policy package (note that a motorcycle is considered part of "Other Rec. Vehicles"):



Depending on when your policy took effect and when you decide to cancel, you will fall into one of two categories:

• You OWE State Farm for premium that you "used up" but did not yet pay for
• You are entitled to a REFUND because you have paid for more premium than you have "used up"

Although I work in the insurance industry, I do not work for State Farm; however, based on State Farm's premium-earning schedule, I have put together the following document to help people understand what they will owe (or be refunded) should they decide to cancel their policy early. The twelve examples I have created below are for the following specific policy effective/renewal dates:

• January 1st
• February 1st
• March 1st
• April 1st
• May 1st
• June 1st
• July 1st
• August 1st
• September 1st
• October 1st
• November 1st
• December 1st

For each example, I show the percentage of the annual policy premium that you owe (or are refunded) at the end of each month of your policy. Bear in mind that State Farm charges you the first and last month's premium up front, so part (or all) or the premium owing will come out of the last month's premium that you have already paid. If you are entitled to a refund, then you will receive the refund percentage indicated below in addition to the last month of premium that you already paid.

Find the example below with the closest policy effective date to your own, and you can get an idea of what will happen should you decide to cancel your policy.

Enjoy!

[armansiu]

woah~ thx for the info!!

[toysareforboys]

Wow man, amazing.

What would be even better, is if you made a little website called "refundorpayoutthe***.com" and you could put a calculator on it like:

Date you signed up with SF
Date you want to cancel
How much you pay monthly
(possibly have a custom option where they can enter the %% for each month in case it changes).

click the magic "screw me or refund" button and it'll spit out what you owe or get back.

Now THAT would be sweeeeeeet.

-Jamie M.

[juancho]

ok... this info (great info btw) is for state farm... so.. in my case... freak.. i have to pay 149 dlls if i do an early cancelation in november...12.7%, now... what about others companies..??? are they doing the same thing...?? actually i consider my monthly insurance payment an average (98 dlls full cover), but if i can save some money with someone else... i will take it...

Juan.

[VifferFun]

ok... this info (great info btw) is for state farm... so.. in my case... freak.. i have to pay 149 dlls if i do an early cancelation in november...12.7&#37;, now... what about others companies..??? are they doing the same thing...?? actually i consider my monthly insurance payment an average (98 dlls full cover), but if i can save some money with someone else... i will take it...

Juan.

I'm not sure exactly what you are asking?

As far as I am aware, all companies earn motorcycle premiums according to a schedule similar to State Farm's. The schedule will vary from one insurer to the next, but it should be pretty close.

I have posted this thread specifically for State Farm, because they are one of the only insurance companies that allow people to pay motorcycle premiums monthly, rather than in a single lump sum at the beginning of the policy term. Other companies charge a lump sum just to avoid confusing the policyholders who think they can cancel their policy in November and not have to pay for the Spring/Summer premium they have used, but not yet paid for. If you have paid your premium in a single lump sum, then you will be entitled to a refund when you cancel the policy, since you have already paid for an entire year of coverage, but you are not using the policy for the full year. Bear in mind, however, that the refund will be very small if you have already used the bike in the "peak motorcycle season", because you have already "used up" a significant portion of your annual policy.

[hindustani420]

Good Information.

[evang]

I'm not sure exactly what you are asking?

As far as I am aware, all companies earn motorcycle premiums according to a schedule similar to State Farm's. The schedule will vary from one insurer to the next, but it should be pretty close.

I have posted this thread specifically for State Farm, because they are one of the only insurance companies that allow people to pay motorcycle premiums monthly, rather than in a single lump sum at the beginning of the policy term. Other companies charge a lump sum just to avoid confusing the policyholders who think they can cancel their policy in November and not have to pay for the Spring/Summer premium they have used, but not yet paid for. If you have paid your premium in a single lump sum, then you will be entitled to a refund when you cancel the policy, since you have already paid for an entire year of coverage, but you are not using the policy for the full year. Bear in mind, however, that the refund will be very small if you have already used the bike in the "peak motorcycle season", because you have already "used up" a significant portion of your annual policy.

so if you pay up front and cancel early, you get a money back.
but if you pay monthly and cancel early, you owe money?


makes sense

[VifferFun]

Wow man, amazing.

What would be even better, is if you made a little website called "refundorpayoutthe***.com" and you could put a calculator on it like:

Date you signed up with SF
Date you want to cancel
How much you pay monthly
(possibly have a custom option where they can enter the %% for each month in case it changes).

click the magic "screw me or refund" button and it'll spit out what you owe or get back.

Now THAT would be sweeeeeeet.

-Jamie M.

Of course I have considered that, but I'm an actuary, not a web programmer

I think the twelve examples I have provided should be sufficient. Really, you can calculate the amount you owe (or are refunded) using State Farm's premium-earning schedule and Gr. 7 level math. For the "mathematically challenged", I have posted the examples so that people can get a ballpark estimate based on the example with the closest effective date to their own policy.

The main purpose of this thread is to illustrate the difference between the rate at which you PAY premium, and the rate at which you "USE UP" premium. Look through the examples I have given and you will see the difference between what you have paid and used up each month of the policy. At the very end of the policy, you will also notice that you have paid 100% and have "used up" 100%, and hence your policy is complete for the year.