You may have heard of – or even been asked to sign – what is called a Consent to Rate (CTR) form as it pertains to your auto or home insurance. The more you read about it, the more confusing it can sound, so we’ve tried to simplify it for you.

North Carolina has a Rate Bureau that sets the rates for all the insurance companies in the state for auto and property. The Rate Bureau sets a “suggested” rate for physical damage (your comprehensive and collision coverage). This suggested rate is similar to a Manufacturer’s Suggested Retail Price (MSRP) that you come across when buying a new car. Though there is a sticker price for the car, the dealer can sell it for a different amount that best suits their business.

This is kind of how it works with an insurance company. If they charge a rate that is beyond the suggested amount, then they must retain the CTR form with your signature to continue charging said rate. Their rates may be higher for any number of reasons but it usually relates to the amount of risk a driver presents based on their driving history, location or vehicle usage. While the state suggests the rates for physical damage, they don’t actually offer physical damage coverage (they only deal with the required liability coverage when they are ceded a policy) and therefore, insurance companies argue that the state’s suggestions don’t accurately reflect the risk involved.

The CTR form is usually included among the other paperwork that needs to be signed when a new policy is started, but it may arise at renewal time if you’ve had any claims or tickets during the previous term, or if you’ve added coverage that you didn’t previously have.

It’s not against the law for insurance companies to charge rates that are higher than the Bureau’s suggested rates, but it is against the law for them to do so without your acknowledgement. That is why the insurance companies are so strict when they send you this form. If you do not sign it in a timely fashion, they will remove the physical damage coverage from your auto policy, or even cancel the policy altogether in the case of homeowner’s insurance.

The language on a CTR form can sound intimidating. After reading it, you might ask, “Why would I agree to let them charge me more than the state says they should?” It’s a legitimate question, but there are two key things to keep in mind.

For one, you already agreed to the rate when the company provided you a quote and you decided to move forward with it. If you hadn’t already decided that quote was reasonable for your needs, you wouldn’t be getting the CTR form. Signing the form is just the formality of acknowledging the rate that the company quoted in the first place and finalizing the contract.

Secondly, signing the form does not mean the insurance company will immediately start charging you more. Your rates will not increase during a policy term unless you make change requests that alter the coverage in some way. Of course, your rates may rise at renewal time, but that is common for all policies and is oftentimes for other reasons as described here.

To make a long story short (and to put it bluntly), you don’t have much of a choice when it comes to signing the CTR form. If you want maintain the coverage on your vehicle or home without interruption, you need to sign the form (continuing with the premium you already agreed to!). If you don’t sign it, the insurance company will remove your coverage (not because they want to, but because they have to) and your property won’t be fixed in the event of a claim. Your third choice is to go shopping for a new insurance company, but the CTR is a state-wide mandate and even if you find cheaper insurance, your savings might be offset by the fees you will incur with the current company by cancelling early, as described here.

Again, your premium will not change from what you were quoted upon signing the CTR form. If it does once your renewal date rolls around, give us a call and we will review your file to make sure you are with the best company for your needs.