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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. They can cancel your policy or they can just not renew it. While these may sound similar, they are very different. Find out which one you want to avoid!

woman on phone after auto insurance cancelled

If your insurance company doesn't want to insure you any longer, there are two ways they can do it legally. 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.

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. So is avoiding driving under the influence and being as truthful as possible on your insurance application. 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 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 apply for coverage at a high-risk carrier. And they'll charge you up to five times the normal car insurance rates you once paid.

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.

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 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'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 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 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 well 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 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: If your policy was cancelled after payment, 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.

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 can ask the insurer to re-rate your policy if their actions were due to faulty credit rating information.

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

A: It depends. At renewal time you can ask your insurance company to re-rate that driver. If the driver comes back clean, the insurance will remove the exclusion and include the driver on your 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. They can legally cancel your policy if the condition impairs your driving ability and puts you and others in danger. For example, if you have epilepsy, and your insurer finds out they can cancel your auto insurance policy.

If a driver doesn't practice full disclosure and lies on the insurance application, it ends badly for them. If you have a health condition, and have an accident because of it, they most likely won't pay the claim. And will cancel your policy. With insurance companies, it's always best to be straightforward. If not, they'll 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. 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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