Health Insurance Articles

Avoiding Penalties When Switching Health Insurance Carriers Online

2011-09-06

Health insurance policy holders are under no obligation to stay with their insurance providers, and every once in a while, a switch from one carrier to another can be extremely beneficial. However, it's important to follow the proper procedures when switching health insurance carriers, as doing otherwise could lead to penalties. Avoiding penalties online is fairly simple when buyers understand their insurance contracts.

The best method of avoiding penalties is to do comparison shopping immediately after buying a health insurance policy to take advantage of the "free look" period afforded by most health insurance carriers. The free look period usually consists of 10 days at the beginning of a policy in which a buyer can cancel his or her policy for a full refund. Free look periods are required by many states and are usually described in a health insurance policy. Buyers should try to research as many health insurance carriers as possible after buying a policy to take advantage of this period. A good way to do so is to use insurance comparison sites, which can provide a few quotes from major health insurance carriers in only a few minutes. After a free look period has expired, buyers will at least have to pay for the time that they'd had their policies, but most carriers will quickly issue a refund for any paid time remaining in a policy's term that won't be used by the policy holder.

It's also important to avoid penalties due to a gap in coverage. While policy holders are under no obligation to give an insurance company advance notice of a policy cancellation, it's advisable to call or email a new insurer when a policy will be cancelled to avoid any type of coverage gap. Many health insurance carriers will even cancel old policies for their buyers. Buyers should be sure to check with their new insurance providers and to understand the terms of a switch from one insurer to another. Most transfers will be handled in a way that there's one hour of "double coverage," as this prevents any type of gap. In the rare event that a claim was made during that hour, the new insurance provider would usually handle the claim first. Medicare users will also need to inform the HCFA before making any switches from one carrier to another.

Avoiding penalties is fairly easy with the right approach. By informing an insurance agents before any changes and by getting documentation of any scheduled changes when switching health insurance carriers, buyers can limit the possibility of a serious mistake and avoid any of the penalties that come with a lapse in coverage.