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Originally Posted by HoustonRider
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Originally Posted by The Beast (750Li)
I did not know they'll refund it. Unusual for insurance, if you didn't need it, they pay it back. I have however replaced 4 tires through the policy and am happy I had it.
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Yep, its pro-rated, so If you wait a year, you don't get as much back. But yes, you can get a refund (minus months covered) for it. There is a procedure on the back of the contract (go online and request, takes about 2 weeks). |
You forgot one little ditty in the refund algorithm: You also need to deduct 100% of any claims paid.
Insurance works from a concept of earned vs unearned premium.
Let say you pay $1200 for a one year policy. The insurance company cannot claim that as revenue until each month passes.
So, in essence you're fronting the insurance company $1200 for the year and it pretty much goes into escrow as unearned premium.
Now, as each month passes, the insurance company will consider $100 earned. So, regardless of claims, the insurance company can only put the earned months on the books.
So, if you cancel your policy 6 months into a annual premium, then the first 6 months are earned and the remaining months are unearned.
Now, they will give you back the unearned premium should you cancel, but BMW insurance wants to deduct 100% of claims paid.
So, returning unearned premium is never a problem for the insurance company since they don't count it anyway as it sits in a virtual escrow.