Why is there an administration fee when I cancel my home insurance policy in Centennial, Colorado?

If you are cancelling your homeowner’s insurance in Centennial, Colorado, you may want to take the administration fees into account. Depending on your companies, administration fees can be hefty, if not simply irritating, when you cancel your homeowner’s insurance. Here’s a few things that you need to know about the administration fee before you cancel your insurance.

Reason for the Administration Fee

Many homeowners may wonder why there is an administration fee in the first place when they cancel their homeowner’s insurance. And it is true that deterrence is a partial motivation for the administration fee. Yet, while it may seem that the fee is just an unfair penalty, there actually is some necessity for the fee.

When you cancel your policy prematurely, your insurance company loses out on the remainder of the payment that it must reimburse to you. Further, the process of filing paperwork and refunding your remaining premium creates additional expenses for the insurance company. Employees of the company also have to divert their attentions from other tasks to oversee the cancelation process. Thus, the cancelation fee helps insurance companies recover the loss that it incurs when it takes the time to cancel a customer’s policy.

How Your Independent Agent Can Help

While there are some good reasons to impose a modest fee, many insurance companies can have extraordinarily hefty fees. While there is not much that can be done to avoid the fees once you have signed your policy, an independent agent can help you learn about any fees that your future home insurance company might charge. Often, the best way to avoid high fees is to proactively search for companies with reasonable fees and leeway for customers.

To learn more about how administration fees and other added fees can impact your homeowner’s insurance policy, contact us today to speak with an independent agent.