Yes. Auto insurance can send you to collections under the circumstances that you default on your agreed payments.
Once you sign a contract with an auto insurance company, they protect you from losses incurred from risks such as theft or accidents. This contract benefits both you and the auto insurance company in that it protects you from incurring losses, while you pay them for the service.
Why Does Auto Insurance Send You To Collections?
Auto insurance companies can hand your account to collections agencies to retrieve their revenue. Collections agencies are only involved when you are behind on payments or have defaulted from paying the agreed amount to the insurance company.
An auto insurance company will only involve the collections agencies after they are sure that you are unlikely to pay their dues. Involving collections removes the responsibility of requesting the money you owe, and now the collections take over the role of ensuring that you pay.
At this point, the collections company is working for the auto insurance company to retrieve their debt, and their job is to ensure you pay any debt.
When Can An Auto Insurance Company Send You To Collections?
An auto insurance company will not send you to collections for just one payment. The grace period provided until the auto insurance company sends you to collections depends on the company.
Some may send the collections agencies as soon as after one month of late payment, while others will wait up to 6 months. However, different companies operate within their timeline and regulations.
Another instance when insurance companies will send you to collections is when you constantly ignore notices from insurance companies. An insurance company will not send you to collections immediately after they notice a late payment.
However, after a few consecutive late payments, the auto insurance companies will send their collections. Ignoring these insurance collections will also result in the involvement of a collections agency.
When an insurance company realizes that you are behind on payments, they send you notices to alert you on the outstanding debt. Ignoring the notices will also result in the company sending you to collections.
The auto insurance company informs you first, before sending your account to collections. This allows you to communicate any financial hindrances to your payments.
It is possible to come up with suitable payment plans to settle your debt and avoid the consequences of having your account with a collections agency.
Will Sending Your Account To Collections Negatively Affect You?
Yes, the automotive insurance company sending you to collections can hurt your finances in the future, as well as your life. The collections agency can sue you for failing to pay their debt.
Through the lawsuit, the court can allow for money to be deducted from your account or paycheck which can be detrimental to your financial plan altogether.
Lawsuits involving debt can also affect your credit score, reducing your chances of getting a loan you might need in the future.
