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Car Insurance Cancelled vs. Non-renewal

When your car insurance company wants to drop you, they can do it in one of two ways, either by cancelling your policy or by not renewing it. While these may sound similar, they are very different. Find out which one you want to avoid!

stressed woman on phone after auto insurance cancelled

If your insurance company doesn't want to insure you any longer, there are two different ways they can legally go about extricating themselves from the policy. Cancellation is the most extreme of the two. In the first few months of a policy, insurance companies can cancel the policy for any reason, although this is uncommon.

The most common reasons an insurance carrier will cancel a policy include:

  • Late payment
  • The loss of your license (because of a DUI or other offense)
  • Or a determination that you provided inaccurate personal information when the policy was created

Cancellation

However, because cancellation is a strike against your insurance record, it's important to do everything you can to avoid it. Making payments on time is crucial, as is avoiding driving under the influence and being as forthright as possible when providing information to prospective insurers. It might be tempting to lie about recent traffic offenses or tickets, but in the long run, this will harm the health of your credit and driving record.

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When your insurer cancels your policy, it stays on your insurance record for five years. However, if a driver accumulates three cancellations in one year, it will be almost impossible to find another carrier willing to take you on as you are now a “high-risk” insured. You’d have to go to a high-risk carrier and pay up to five times the normal car insurance rates you once paid at a standard insurance carrier.

Non-renewal

Non-renewal is a different story, and doesn’t carry the severe consequences that cancellation does. When your car insurance policy has run its course, your insurer may decide that they no longer want to insure you. Generally, an insurer will issue a non-renewal notice if:

  • You have filed multiple claims in a short period of time
  • Your credit rating has declined sharply, and your current insurer sees you as a liability
  • The carrier is restructuring its insurance lines of business or pulling out of a certain line and is discontinuing your policy through no fault of your own

While you searching for a new policy, it's not nearly as difficult to bounce back from a non-renewal as it's a cancellation.

When it comes to non-renewals and cancellations, many states have different laws on how and when an insurance company can non-renew you or cancel your insurance policy. There are protections in place, so insurance companies do not just leave insureds high and dry. Below is an example of the different ranges of non-renewal and cancellation required notice period.

State Days for Non-renewing an insured Days for Cancelling an insured
Maryland 10 30
Virginia 10 45
Rhode Island 10 30

If your car insurance company cancels your policy, on average, you will have about 20-45 days to make other arrangements. This can be a challenging and frustrating time, especially if you have a new car, or don’t even know where to find alternative insurance coverage. If you need to purchase an affordable policy, use QuoteWizard to compare auto insurance quotes and find the lowest rates.

Here are the answers to some common questions regarding a cancelled or a non-renewed insurance policy.

Car Insurance Cancellation/Non-Renewal Q & A

Q: My car insurance was cancelled, what can I do?

A: First and foremost, don't panic. Next, read the entire letter. Every insurance company must give you a certain amount of time to find a new carrier once you've been cancelled. No matter what state you're in, on average, you'll have 20-45 days to find a new insurer.

Q: My car insurance was cancelled, but I have financed a new car. What do I do?

A: When you purchase a new car, the lender requires that you supply them with the insurance information because the lender requires the buyer to obtain comprehensive coverage. So, your auto finance company is well aware who your insurance company is and vice versa. If an insurance carrier cancels your auto policy, they'll send you and your auto finance company both a letter stating that your policy will be terminated on a given date.

At this point, your auto finance company will also send you a letter. Their letter will note that:

  • Full coverage is required according to the terms and conditions of your auto finance agreement.
  • You have a short period of time to obtain new coverage.
  • If you don't obtain car insurance by a certain date, they will provide you a policy. This policy could be very expensive, because the auto finance company won't shop around for the best rates.
  • Finally, if you don't pay the premium of the car insurance policy they found for you; the lender will ultimately repossess the vehicle. You can avoid this by obtaining new coverage in the timeframe given to you after cancellation.

Q: Do I get back any money if I paid my premium and then my policy was cancelled?

A: In the event that your car insurance policy was cancelled after you sent in a check, the insurance carrier is obligated by law to return the portion of the money that was not earned. It's referred to in insurance parlance as “unearned premium.” So yes, you’d get some of your premium back, maybe even all depending on the timing of the check.

Q: Can I fight or refute a cancellation or a non-renewal?

A: Yes, you can send a letter to your insurance carrier telling your side of the story, and it may help. However, the success rate of consumers who try this is low. The exception is if a cancellation or non-renewal occurred due to on an error in your credit rating. You could ask an insurance carrier to re-rate your policy if their actions were due to inaccurate or faulty credit rating information.

Q: Does a “specifically excluded driver” endorsement continue at renewal?

A: It depends. If your renewal comes up and a driver excluded by the policy wants another shot, you as the named insured can ask your insurance company to re-rate that driver. If that driver comes back clean, the insurance will remove the exclusion and make the excluded driver an included driver on your auto policy.

Q: If I have a medical condition, can my auto insurer cancel my policy?

A: Yes, they can; although it depends on the medical condition. There are some laws in their favor that allow them to do this if the medical condition impairs your driving ability and puts you and others on the road in danger. For example, if you have epilepsy, and your car insurance carrier finds out (which they probably will, one way or another) they can cancel your auto insurance policy in most states.

If a driver does not practice full disclosure and lies on the insurance application, it typically ends badly for them. If you have any health conditions, and you get into an auto accident because of the epilepsy, which you did not tell the insurance company about, they most likely will not pay the claim and will cancel your policy. With insurance companies, it's always best to be straightforward. If not, they will likely find out eventually, and the cost will probably be much higher then.

Q: My auto insurer just cancelled my policy and didn’t tell me why. What can I do?

A: Although this is rare, it can happen. In the event that your policy is cancelled without an explanation, you can contact the insurance company and have them check your account to see why you were cancelled. They should be able to tell you if it was for non-payment of premium, too many claims, or they found a fabrication on your auto policy application such as a pre-existing health condition. In the event that they still refuse to tell you, which is also rare, you should contact your state insurance commissioner’s office and report this.

If your insurance was not renewed or your policy was cancelled, use our easy online quote request form to compare car insurance rates from top companies and maintain coverage.

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