What to do About a Car Insurance Cancellation
Your car insurance company can drop you by either refusing to renew or canceling your policy. Find out what to do in this situation.
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, or they can refuse to renew your policy. Cancellation is the more extreme of the two actions. Typically, in the first few months of a policy, insurance companies can cancel a policy for any reason, like after too many accident claims or missed payments. This article touches on:
- What to do after your insurance is canceled
- How to avoid a car insurance cancellation
- State insurance cancellation laws
- How many accidents until your insurer drops you?
My car insurance company canceled my policy. 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 canceled. You'll typically have around 20 to 45 days, depending on the state where you live, to find a new insurer.
Fighting a cancellation or 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, but the success rate of consumers who try this is low. The exception is for a cancellation or non-renewal due to 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 canceled, 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 of 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 state 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 with a policy. This policy may be more expensive than average since it's provided by the finance company.
- 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 time-frame given to you after cancellation.
Do I get any money back if I paid my premium and my policy was canceled?
If your policy was canceled 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 of it, depending on the timing of the check.
My auto insurer canceled my policy without telling me why. What can I do?
Although this is rare, it can happen. If your policy is canceled without an explanation, you should contact the insurance company and ask why you were canceled. They should tell you if it was canceled for non-payment, too many claims or because you lied on your policy application. If they still refuse to tell you, contact your state insurance department and report it.
If your insurance wasn't renewed or your policy was canceled, compare car insurance rates from multiple companies. Other insurance companies may be willing to insure you at an affordable rate.
How to avoid a car insurance cancellation
According to the Insurance Information Institute, the most common reasons an insurance carrier will cancel your policy include:
- Multiple tickets or accidents.
- Late payment.
- The loss of your driver 's 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 may be tempting to lie about recent traffic offenses or tickets to get a lower rate, but in the long run, this could harm the health of your credit and driving record.
How long will a cancellation stay on my 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 may be almost impossible to get insurance. That's because you'll be considered "high-risk." You 'd have to apply for high-risk auto insurance with a carrier willing to cover you. And they'll likely charge you significantly more than the standard 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, the 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 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 cancel your insurance policy or issue a non-renewal. There are protections in place so insurance companies can 't just leave policyholders high and dry. Below is an example of the different ranges of non-renewal and cancellation required notice periods.
|State||Required notice period for policy non renewal||Required notice period for cancelling a policy|
|New Jersey||60 days||15 days|
|Virginia||10 days||45 days|
|Rhode Island||10 days||30 days|
If your car insurance company cancels your policy, you'll have about 20 to 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 accident and other factors.
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.
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