Car insurance companies may cancel your auto coverage in one of two ways: nonrenewal or cancellation. Some common reasons a company might cancel your car insurance include late payment and too many accidents. In either case, you need to get a new policy quickly, as nearly all states require you to have car insurance to drive legally.
This article will cover:
Car insurance cancellation vs. nonrenewal
While both cancellation and nonrenewal end with you being without car insurance, the reasons for either can be very different. Car insurance cancellation is usually considered more serious than nonrenewal of your policy, as it can affect your insurance record. Nonrenewal is easier to recover from, but may still indicate issues you should address.
Car insurance cancellation
The Insurance Information Institute states that the most common reasons for car insurance cancellation include:
- Late premium payment.
- Loss of driver's license.
- Giving inaccurate information when buying a policy.
When your car insurance policy is cancelled, it usually stays on your insurance record for about five years, but it can be longer. This could result in you needing to get high-risk car insurance, which comes with higher-than-average premiums.
Many states have laws regarding when your car insurance policy can be cancelled. Depending on which state you're in, you're usually given between 15 and 45 days notice before you'll need to have a new policy. You will be sent a cancellation letter notifying you of when your coverage officially ends.
You can refute the cancellation, but this usually doesn't work unless the cancellation was due to an error in your credit rating. In this case, ask your car insurance provider to re-rate your policy. If you pre-paid your car insurance policy, your insurer should return the unused amount to you.
Car insurance nonrenewal
If your car insurance company chooses not to renew your policy on its expiration date, it isn't as severe as cancellation. Your rates shouldn't increase when you look for new car insurance after nonrenewal. Reasons for nonrenewal include:
- Moving across state lines.
- Certain products in your policy are being discontinued.
- You bought a new car.
- You filed multiple claims.
Do car insurance companies have a grace period for late payment?
Late payment is probably the most common reason for an auto insurance cancellation. Car insurers who offer grace periods for late payment may give you anywhere from one to 30 days to bring your account current. Keep in mind that this grace period is only for payment of policy. In all states except New Hampshire, you're required to have car insurance in order to drive legally.
Some auto insurance companies offer reinstatement of car insurance if your car insurance was cancelled due to non-payment. Your ability to reinstate your coverage depends on factors including:
- Your auto insurance company.
- Amount of time that's passed since your late payment.
- If your policy has lapsed in the past.
If you are able to get a reinstatement, you'll pay the balance of what you owe, along with any late fees. You will be able to keep your same policy number and coverage. Your premium might go up, but there will more than likely be extra fees depending on your provider and where you live.
What should I do after my car insurance is dropped?
The first thing to do after your current provider drops your coverage is to start looking for a new policy. Driving without auto insurance in nearly all states is illegal, and can result in tickets that could increase your rates even more when you do get coverage. Compare car insurance quotes from multiple providers.
If your car insurance policy was cancelled and not renewed, you can expect to see higher rates when you look for quotes. Even so, comparing many quotes is the best way to make sure you are finding the best, cheapest car insurance premium available.
How many accidents before your car insurance is cancelled?
There isn't a set limit on the number of accidents you can have before an insurer cancels your policy. There are many factors to consider when they make the decision, including:
- Your car insurance provider.
- Where you live.
- Severity of the accident(s).
- Amount of time between accidents.
Since filing claims can be a factor in your policy being cancelled or not renewed, it's a good idea to avoid filing a car insurance claim if you can afford to pay out of pocket for repairs. This makes good long-term financial sense as well. A claim stays on your record for three to five years. During this time, you will likely see an increase in your rates. Paying out of pocket for repairs instead of filing a claim can help avoid this.
My car insurance company dropped my policy without saying why. What can I do?
While it's rare for an insurance company to drop you without saying why, it does happen. If you don't get a reason for the cancellation or nonrenewal of your policy, contact your provider. They should tell you what the reason is. If they refuse to tell you the reason, you should contact your state's insurance department and file a report.
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