What do I do if my auto insurance cancelled me and sent me a refund, if they sent me too much money by mistake?

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What do I do if my auto insurance cancelled me and sent me a refund, if they sent me too much money by mistake?

My insurance company seemed to send me my full premium back when they cancelled me, the local office is aware of the mistake, and said the home office would bill me. I have not heard anything from the home office asking for the money back. I’ve already spent some of the money getting new insurance etc. Do I really have to send it back? Can I keep it if it was their mistake and my policy is cancelled anyway? Or if I do have to send it back, do I wait for a official letter, can I pay it back in payments since I don’t have all of it now? The home office has not told me to give it back.

Asked on October 20, 2011 under Insurance Law, Arizona

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

1) A mistake does *not* entitle you to keep the  money, so even if it's their mistake, if they ask for it back, you have to repay it. (Consider: if you had accidentally sent too large a check for the premiums--i.g. accidentally overpaid--you'd have the right to get the overpayment back; the same thing applies when the insurer overpays you.)

2) You could wait to see if they request payment; after all, even if you have to repay the money on request, if no one ever asks for it, that's their problem, not yours. Do bear in mind, though, that technically the overpayment is income to you and would have to be accounted for  on your taxes.

3) If they do request repayment, they will be entitled to ask for it all back at once; if you can't pay it then, they could take legal action against you. They are under no obligation to accept a payment plan or schedule, though they probably are more likely to do so if you voluntarily come forward to them.


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