What is Electronic Funds Transfer Insurance Coverage and How it Works?

Electronic Funds Transfer Insurance Coverage

The fraudulently communicated instructions from a nonemployee that cause funds to be mistakenly transferred to or from a customer’s checking or savings account are covered by the electronic funds transfer insurance coverage, which is a financial institution’s criminal coverage.

Further Details

The Surety & Fidelity Association of America (SFAA) financial institution bond for banks includes a fraudulent transfer instructions rider that offers coverage for losses resulting from transfers made by banks in reliance on false instructions received through phone, fax, or email.

EFTs’ Benefits

EFTs' Benefits

Using EFTs to manage your insurance payments has a number of benefits.

Single-Use Setup

Using EFT has the advantage that it only has to be set up once, guaranteeing on-time delivery of all subsequent payments. On the same day each month, your payment will be deducted from your account. There’s no need to create a check, pay postage, or attempt to recollect the password for a billing website you almost ever use.

Note

You could prefer utilizing a checking or savings account as a source of cash instead of a credit card since credit cards require their expiration dates to be updated on a regular basis. Until you move banks, those account data will never need to be altered.

Find out from your insurance agent what sources of finance your company accepts. Some businesses don’t allow the use of debit or credit cards, or they restrict your selections to solely checking accounts.

Reduce Fees

When you submit monthly payments to insurance providers, they could assess processing, payment, or service costs. Depending on the insurance company and your state, these costs might range from $3 to $10.3 Usually, the price can be avoided or lowered if you set up an electronic money transfer. Also, if you have your payment scheduled to withdraw automatically, you won’t ever have to worry about a late payment charge.

Note

You can still be required to pay an installment charge for the benefit of paying monthly rather than all at once, even if your service costs are decreased or abolished.

Discounts on EFT

Some businesses even grant an extra discount for using EFT payments in addition to the payment charge savings. Every little bit helps, even if it isn’t as nice as the reduction for paying your premium in advance. Ask your insurance company if there are any savings available for using EFT as a form of payment.

EFT Mistakes to Avoid

EFT Mistakes to Avoid

While there are many advantages to practicing EFT, there are also certain risks you should be aware of.

Changing Banks

Avoid making a mistake by changing banks without informing your insurance provider. The insurance company cannot remove your payment and your premium won’t be paid if you transfer banks and shut the account you had permitted payments to be withdrawn from. Unpaid policies can lead to serious issues.

Note

You run the risk of having your insurance terminated for nonpayment if you transfer banks and disrupt your payments. It’s crucial to notify your biller straight away if any funding-related information changes.

Keep a note of all the invoices that are deducted from your account each month so you can immediately update each one in case of a change. This will help you avoid forgetting to tell a biller when transferring banks. The same holds true for changing credit card expiration dates or numbers.

Changing Insurance Providers

Your carrier requires time to process the change whether you make adjustments to your account or transfer insurance providers entirely. Even if your policy is canceled, a payment that was planned to be withheld before to that time may still be processed.

As soon as you are aware that you are moving providers, you should request that your EFT payments be stopped. Don’t wait until the last minute, though, since the removal may take a few days to process.

Note

Even if you’re canceling your insurance, it’s a good idea to have money in your bank account to pay the planned EFT. If the payment is received as expected, the insurance provider will reimburse you for the excess.

Insufficiency of Funding

You must retain sufficient funds in your bank account to cover your payment, it is crucial to remember this. It’s the same as having bounced a check if the insurance company wants to withdraw the money and you don’t have adequate cash.

You will be assessed an overdraft or non-sufficient funds fee by the bank. If you have several rejected payments, the insurance company could not even renew your coverage. In addition to charging you a return payment fee, they might even terminate your policy. A bounced payment is less likely if you keep a careful watch on your bank account balance and always provide yourself with a cushion of additional money.

Electronic Fund Transfers FAQs

Electronic Fund Transfers FAQs

The Electronic Financial Transfer Act (EFTA) and Regulation E are both addressed in the questions and answers that follow.

The Consumer Financial Protection Bureau has released this compliance tool. To describe the Bureau’s approach to compliance aids, the Bureau prepared a Policy Statement on Compliance Aids, which is available online.

Coverage: Transactions

1. What transactions are covered by the Electronic Fund Transfer Act and Regulation E?

An electronic fund transfer that permits a financial institution to debit or credit a customer’s account is governed by the Electronic Fund Transfer Act (EFTA) and Regulation E. 12 CFR 1005.3(a) (a).

The term “account” refers to a demand deposit (checking), savings, or other consumer asset account maintained directly or indirectly by a financial institution and formed largely for personal, family, or household needs (other than an occasional or accidental credit amount in a credit plan). 12 CFR 1005.2(b)(1) (1). A prepaid account as described by Regulation E is included. 12 CFR 1005.2(b)(3) (3).

Any transfer of money ordered, instructed, or authorized by a financial institution to debit or credit a customer’s account by an electronic terminal, telephone, computer, or magnetic tape is referred to as a “electronic fund transfer” or “EFT.” 12 CFR 1005.3(b)(1) (1). Debit card, ACH, prepaid accounts, and other electronic transfers to or from a consumer account are examples of P2P or mobile payment transactions that fall under the definition of EFT and are thus covered by Regulation E. Comment 3(b)(1)-1.ii and 12 CFR 1005.3(b)(1)(v).

2. Can person-to-person or “P2P” payments be EFTs under Regulation E?

Yes.

The ability to transmit money from one person to another without exchanging cash, writing a check, or using a real card is known as “P2P” payments. A P2P payment can be started using a customer’s online bank account portal, prepaid account portal, or mobile application, depending on the payment service provider.

Regulation E and EFTA apply to every P2P payment that satisfies the EFT definition (for more details, see Electronic Fund Transfers Coverage: Transactions Question 1). For additional information on EFTA and Regulation E’s coverage of P2P payment providers, see Electronic Fund Transfers Coverage: Financial Institutions Question 2.

3. Is a P2P payment that uses the consumer’s debit card to transfer funds considered an EFT?

Yes. Regulation E is applicable to any electronic funds transfer (EFT) that gives a financial institution permission to debit or credit a customer’s account, as was covered in Electronic Fund Transfers Coverage: Transactions Question 1. 12 CFR 1005.3(a) (a). Debit card transactions are referred to as EFT. 12 CFR 1005.3(b)(1)(v) (v).

4. Is a credit-push P2P payment that transfers funds out out of a consumer’s deposit, prepaid, or mobile account considered an EFT?

Yes. Regulation E is applicable to any electronic funds transfer (EFT) that permits a financial institution to debit or credit a consumer’s account, as was covered in Electronic Fund Transfers Coverage: Transactions Question 1. 12 CFR 1005.3(a) (a). EFT refers to any transfer of money ordered, instructed, or authorized to a financial institution to debit or credit a customer’s account using an electronic terminal, telephone, computer, or magnetic tape. 12 CFR 1005.3(b)(1) (1). In order to command, direct, or authorize a financial institution to debit a customer’s account, a credit-push P2P payment is regarded as a transfer that is started using an electronic terminal, telephone, or computer and is, thus, an EFT.

Even if a third party used login information that was stolen in a data breach or was gained through deceptive enticement to conduct a credit-push P2P transfer, the transaction is still regarded as an EFT. The credit-push P2P transfer in these circumstances would be regarded as an unlawful EFT. For further information on what constitutes an unlawful EFT, see Electronic Fund Transfers Error Resolution: Unauthorized EFTs Question 1.

5. Is a P2P debit card “pass-through” payment considered an EFT?

Yes.

A “pass-through” payment often involves the transfer of money from one person’s external financial institution-held account to another person’s external financial institution-held account. A “pass-through” payment is one that is made by a financial institution other than the one that holds the account of the customer, such as a non-bank P2P provider. Regulation E is applicable to any electronic funds transfer (EFT) that permits a financial institution to debit or credit a consumer’s account, as was covered in Electronic Fund Transfers Coverage: Transactions Question 1. 12 CFR 1005.3(a) (a). Debit card “pass-through” payments are considered EFTs because, as was covered in Electronic Fund Transfers Coverage: Transactions Question 3, the word EFT encompasses debit card transactions. 12 CFR 1005.3(b)(1)(v) (v). For further details on the responsibilities of the financial institutions engaged in a debit card pass-through payment with regard to mistake resolution, see Electronic Money Transfers Coverage: Financial Institutions Questions 3 and 4.

Conclusion

Add your insurance provider to your list of billers if you have been utilizing electronic money transfers to pay other payments successfully. Your bottom line will increase thanks to the financial incentives, and the convenience is unmatched. You may easily set up an electronic payments transfer by contacting your agent or registering on the website of your insurance company. You can read about What is Portable Electronics Insurance and who needs it?

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