Car Insurance Cancellation or Non-Renewal After an Accident
When your car insurance company wants to drop you, they can do it in one of two ways. They can cancel your policy, or they can refuse to renew it.
If your car insurance company doesn't want to insure you any longer, there are two ways they can stop covering you. They can cancel your policy and drop you, or they can refuse to renew it. 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. This article touches on:
- Car insurance cancellation vs. non-renewal
- State insurance cancellation laws
- How Many Accidents Until Insurance Drops You?
Car Insurance Cancellation
According to the III, the most common reasons an insurance carrier will cancel your policy and drop you include:
- Multiple tickets or accidents
- Late payment
- The loss of your license (because of a DUI or other offense)
- Giving inaccurate personal information when your policy started
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. So is avoiding driving under the influence and being honest on your insurance application. It might be tempting to lie about recent traffic offenses or tickets to get a lower rate. But in the long run this will harm the health of your credit and driving record.
When your insurer cancels your policy, it stays on your insurance record for five years. However, if a driver collects three cancellations in one year, it will be almost impossible to get insurance. That's because you're now a “high-risk” insured. You’d have to apply for high-risk auto insurance with a carrier willing to cover you. And they'll charge you up to five times the normal car insurance rates you once paid.
Car Insurance Non-renewal
Non-renewal is a different story and doesn’t carry the severe consequences that cancellation does. When your policy has run its course, your insurer may decide to drop 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
- The company is pulling out of a certain line and is discontinuing your policy through no fault of your own
Luckily, it's much easier to bounce back from a non-renewal than a cancellation.
State Cancellation Laws
Many states have 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 can’t 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|
If your car insurance company cancels your policy, on average, you'll have about 20-45 days to make other arrangements. This can be a challenging and frustrating time. It's even tougher if you have a new car, or don’t know where to find alternative insurance coverage. If you need to purchase an affordable policy, compare auto insurance quotes and find the lowest rates.
How Many Accidents Until Insurance Drops You?
There is no exact number of car accidents you need to get into for your insurance company to drop you. It depends on your insurance company, where you live, the type of accidents, and more.
Your insurer will consider several factors before choosing not to renew your policy or cancel it entirely. How many claims you make is a factor, especially if those claims are filed within a three-year period. A good way to avoid filing too many claims is to only file necessary claims that you can’t pay for on your own.
My Car Insurance Company Dropped Me. Now What?
First, read the cancellation or non-renewal letter and find out when your coverage officially ends. Every insurer must give you a certain amount of time to find a new car insurance company once you've been cancelled. No matter what state you're in, on average, you'll have 20 to 45 days to find a new insurer.
Fighting a cancellation or a non-renewal
If you want to refute a cancellation or non-renewal, you can send a letter to your insurance carrier telling your side of the story. It may help. The success rate of consumers who try this is low. The exception is for a cancellation or non-renewal due to on an error in your credit rating. You can ask the insurer to re-rate your policy if their actions were due to faulty credit rating information.
My car insurance was cancelled, but I have financed a new car. What do I do?
When you buy a new car, the lender will ask you for your insurance information. That's because banks and other auto loan financers require borrowers to maintain comprehensive coverage.
So, your auto finance company is aware who your insurance company is and vice versa. If your carrier cancels your policy, they'll send you and your finance company a letter. This letter will state 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'll 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 for the car insurance policy they found for you, the lender will repossess the vehicle. You can avoid this by getting new coverage in the timeframe given to you after cancellation.
Do I Get Back Any Money if I Paid My Premium and Then My Policy was Cancelled?
If your policy was cancelled and you had prepaid for coverage, the insurance company must return it. This is called “unearned premium.” So yes, you’d get some of your premium back, maybe even all depending on the timing of the check.
My Auto Insurer Cancelled My Policy Without Telling Me Why. What Can I Do?
Although this is rare, it can happen. If your policy is cancelled without an explanation, you can contact the insurance company and ask why you were cancelled. They should tell you if it was for non-payment, too many claims, or you lied on your policy application. If they still refuse to tell you, contact your state insurance commissioner’s office and report it.
If your insurance wasn't renewed or your policy was cancelled, compare car insurance rates from multiple companies. There are other insurance companies out there willing to insure you at an affordable rate.
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