It’s about that time of year when I get a lot of calls asking to cancel snowmobile insurance policies because the season is just about over.
Typically, that’s not a great idea. Insurance companies know that you’re not laying fresh tracks in the snow in mid-July but they encourage you to keep the policy all year and it’s actually beneficial for both you and the insurance company if you do.
Since the insurance company knows you’re not riding your snowmobile over the summer, most insurance companies earn the annual premium over 4-6 months instead of 12. Basically, that means that if you purchase your snowmobile insurance in October and cancel it in April, you’re not going to get a refund. You’re not saving any money by cancelling and repurchasing each year so it’s actually easier for you to keep the policy active and just renew it each year rather than going through the application process for a new policy each year.
Keeping the policy active all year is also beneficial for you because you’ll be covered if something happens to your sled over the summer. Maybe you back into it with you truck or an animal chews through the wiring while it’s in storage. It could burn if your shed catches on fire or it could get stolen. There are all sorts of things that could happen to your sled over the summer and you probably want insurance coverage for those things.
In addition to having coverage over the summer, you’re accruing tenure with your insurance company. The longer your policy is continuously active, the more favorably the insurance will look upon you if you report a claim. Many policies will avoid claim surcharges and even avoid non-renewal in the event of multiple claims if you’ve been loyal to the insurance company by keeping your policy active for a long period of time.
It’s also beneficial for the insurance company because it costs them money to issue new policies. If you cancel at the end of each season and purchase again at the beginning of the next season, the insurance company has to pay for your motor vehicle reports all over again in addition to having to pay an underwriter to process and issue the coverage. There are several other costs associated with issuing a new policy that aren’t incurred with renewing active policies. It doesn’t sound like much but if you multiple that by thousands of policies each year, the expense adds up quickly.
John Lofrumento, CFP®, FSCP®, RICP®
President, The Lofrumento Agency
Clifton Park, NY / Ballston Lake, NY