What Are the Risks of Contract Renewal in Insurance?

Contract renewal can feel routine—but it carries hidden risks. Knowing what to watch for helps you avoid surprises and ensures you remain protected without overpaying.

1. Automatic Premium Increases

During renewal, insurers may raise premiums based on:

• Increased risk exposure (e.g., aging property or moving to higher-risk zones)

• Market rate adjustments

• Claims history or credit changes

If you don’t review your renewal notice, you may end up paying significantly more without knowing why—sometimes premium increases reach 10–15% year-to-year.

2. Loss of Discount Eligibility

During renewal:

• Loyalty or bundling discounts may expire if criteria have changed.

• You might lose eligibility for claims-free or senior driver discounts.

Without reapplying or confirming your discount status, your renewal rate may be higher than necessary.

3. Outdated or Unneeded Coverage Continues

If your situation changed—like selling a vehicle or upgrading alarms—your policy may still renew with outdated coverage, leading to:

• Unnecessary premium costs

• Gaps in protection if new risks are not included

4. Deductible and Coverage Armageddon

Insurance companies may adjust:

• Deductible thresholds, causing higher out-of-pocket costs

• Coverage limits or structure, reducing policy value

• Some policies add new exclusions or limitations at renewal

These changes might go unnoticed unless you review the contract carefully.

5. Poor Communication or Missed Deadlines

If an insurer fails to send renewal notices promptly—or you’re unaware of the deadline—policies can lapse unexpectedly. This can cause:

• Uninsured periods

• Higher rates when reapplying

• Penalties for non-continuous coverage

6. Difficulty Cancelling Mid-Term

Some insurers penalize cancellations after renewal:

• Short-rate penalties (e.g. 10% fee) reduce refunds

• Administrative fees may apply

• You may be locked into the policy for a set term

Cancellations become harder and costlier after renewal than during the initial policy period.

Summary Table

Final Thoughts

Contract renewal brings convenience—but also potential pitfalls. Avoid costly surprises by reviewing your renewal notice 30–60 days before expiry. Compare quotes, confirm discounts, adjust coverage, or cancel if needed—before renewal takes effect.

Need assistance reviewing your renewal terms or switching plans?
With over 30 years of industry insight and access to nearly 100 top-rated carriers, THAgency helps you find the best fit at the best price. Submit your request today for a personalized quote—fast, free, and tailored to your needs.