Is it legal for an insurance company to change the premium after the fact?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Aug 29, 2011

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Insurance Question from Sunnyvale, CA

Asked on 08/29/2011

Is it legal for an insurance company to change the premium after the fact? I had paid for my homeowners policy in full, but then my insurance company changed the premium during the term of the policy because I had cancelled my auto policy with them. Is an insurance company allowed to change the premium like this after the fact?

Answer given on September 03, 2011

Insurance companies often give discounts to their clients for having multiple policies. This type of discount is based upon those policies remaining in effect throughout the term of the policy. Since you cancelled your auto policy during the term of the homeowner insurance, the insurance company can remove that discount effective the date that the auto insurance cancelled. On the other hand, if you had purchased a policy that qualified you for a discount, it would have been applied immediately, not waiting until the renewal date.Your insurance agent should have warned you that you would lose the discount if you cancelled your auto policy, so that you would be forewarned of the change. While they are not required to do so, it is a courtesy they should have afforded you.If there is a change in underwriting of a policy, such as a loss or ticket on an auto policy, the rates cannot be changed until the renewal date. This also applies to any surcharge that the company may impose for a homeowner loss. There cannot be an increase until renewal.

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