How Car Insurance Companies Can Drop Your Policy

There are many ways that your insurer could drop your policy. Here's how they do it and ways you can get back in their good graces.
Agent holding insurance policy form

Did you just get a letter in the mail from your insurer that they’re going to drop your insurance in the next 30 days? This can be an alarming and confusing message to receive for customers. If you just received this news, you’ll want to take immediate steps to ensure that you can get the coverage you need. You’ll have a few options after receiving this notice:

  • High-risk car insurance
  • Personal bonds
  • Following a state program that can help you

There are many different reasons that car insurance companies might end, deny, or not renew your policy. The three main ways that insurance companies drop your policy are:

  • Cancellations
  • Denial of insurance
  • Non-renewals

This article will tell you how and why companies drop your policy. We’ll also tell you about how you can re-acquire auto insurance. This includes how you can get back in your insurer’s good graces.

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How Insurance Companies Can Drop Your Policy

An insurance company may choose to stop doing business with you, but they often do so in a few different ways. The main ways that insurance companies drop your policy are through cancellations, denials, or non-renewals. Each one has its own set of reasons and is a bit different.

Here’s an explanation of each way an insurer can your policy and why it happens:

Cancellations

A cancellation on your insurance means that your provider has decided to immediately terminate your policy. This could happen for any number of reasons. According to the Insurance Information Institute (III), an auto insurer can’t cancel your policy after a 60-day period unless you:

  • Commit fraud or provide false information
  • Don’t pay your rates
  • Lose your driver’s license or the state suspends it

The above are very serious offenses that, by law, give insurance companies the right to cancel your policy. Other reasons that often cause cancellations are if:

  • Your car isn’t safe. You can lose your insurance if your insurer deems your car as unsafe or if it fails an inspection.
  • You’re high-risk or have too many accidents/tickets. Having too many accidents and moving violations on your record can result in carriers canceling your insurance. This can also mean you’re a high-risk driver, which can make insurance hard to buy.
  • You use your car for ridesharing purposes. Driving passengers around for services like Uber or Lyft without letting your insurer know can cause a cancellation of your policy. This is because you’re using your car for purposes other than what you’ve told your carrier. To avoid losing your insurance, you’ll need a special rideshare policy.
  • You use your car for business and not just personal use. Using your car for business reasons requires you to get a different type of insurance policy. This could mean making deliveries, taxiing people around (see the previous bullet), or other business practices. Doing any of these things without telling your insurance provider can cause them to cancel your policy.

Remember, a cancellation means that your insurance provider is choosing to end your business with them ASAP. Insurance companies will usually notify you of cancellation by mail within a 20-to-45-day range. Your provider will owe you a refund for any “unearned premium” that you paid. An unearned premium is an amount that you paid for in advance but that hasn’t taken care of any coverage yet.

Denial of Insurance

A denial means that you’re shopping for car insurance, but providers will make it so you can’t get a policy. This is different from cancellations or non-renewals because providers don’t even let you get your foot in the door.

Here are common reasons for an auto insurance company to deny you:

  • You’ve committed fraud
  • Your car doesn’t meet your state’s safety requirements
  • You’re a high-risk driver or have too many accidents or moving violations
  • An insurer has canceled your insurance within the last two years
  • The state has revoked or suspended your driver’s license

The reasons for insurers to deny you insurance have to do with your track record as a driver and customer. Insurance companies shy away from people that they believe to be high-risk or a liability.

Non-renewals

A non-renewal means that you or your provider choose not to renew your insurance policy once it expires. This is different from cancellations because you’re able to keep your policy until the term ends. Your insurer must give you advance notice of a non-renewal. The timing of the notice depends on state laws.

Non-renewals could happen for a number of reasons. It might not even have anything to do with you or your record. The main reasons an insurer might not renew your policy are:

  • Your driving record (e.g., accidents, tickets, DUIs, DWIs)
  • You’re a high-risk driver
  • The insurance company is dropping your type of insurance or isn’t insuring people in your area

Insurance companies might not tell you why they’re not renewing your policy. It’s always an option to call and ask why. This is a good idea if you don’t agree with their reasoning or don’t know why they did it.

Your rates might not always go up if you have a non-renewal. This will usually happen if your driving record has problems or if you’re high-risk.

What Happens When You Lose Your Policy?

Losing your insurance policy can leave you feeling helpless or confused. There are some consequences that you should know about before trying to figure out what to do next. For instance, losing your insurance can affect future rates or your ability to get insurance.

Below is an explanation of what you need to know after losing your policy:

Your Insurance Company Might Tell the DMV

It’s possible that your insurer will tell the Department of Motor Vehicles (DMV) if you lose your policy. The law requires providers to notify the DMV if they cancel your policy. They may also do the same if you have a non-renewal. This is because states don’t want people to drive without insurance.

Insurers telling the DMV about a policy cancellation or non-renewal can also spell trouble for you in other ways. It can make it difficult to renew your license or register your car. The state sees a cancellation as a red flag, so they act accordingly. How a DMV handles you losing your policy can differ depending on the state. Be sure to check your state laws to know if you could be in trouble.

It’s a Bad Idea to Drive Without Insurance

Driving without car insurance is a bad idea. Doing so can get you into financial and legal trouble. You run the risk of having to pay out of pocket for expenses in an accident even if you aren’t at fault.

Most states require drivers to carry a minimum amount of insurance. New Hampshire and Virginia are the only states that don’t require coverage. Driving without insurance is a violation of the law in all other states. Here’s a list of some things that can happen to you if you drive without it:

  • Fines
  • License suspension
  • Have to pay out of pocket for accidents. This is regardless of fault
  • Pay for legal fees out of pocket. You also won’t have financial protection in a lawsuit

You should have auto insurance if you want to drive. Plain and simple. Not doing so can financially ruin you or leave you unable to drive.

How to Get Insurance Again

Losing your insurance doesn’t mean you should go on without it. There are ways to protect yourself after an insurer drops your policy. These are some of the most common ways to get insurance after previously losing it:

High-risk Insurance

A common reason for losing your insurance is by being a high-risk driver. This means you have too many tickets and/or accidents on your record. It can be hard to get insurance once you’re a high-risk driver.

Some companies will offer high-risk insurance for people who need it. States also offer risk pools where they will assign an insurer to you. Be aware that this non-standard high-risk insurance costs much more than regular insurance. But it’s better than nothing in this situation.

Personal Bond or SR-22

A personal bond or SR-22 form is another way to protect yourself if you need insurance. It isn’t a type of insurance. It’s a certificate that states or courts require for certain drivers. This form certifies that your liability insurance will be enough to fulfill your state’s minimum requirement. Be aware that having an SR-22 can tell insurers that you’re high-risk, driving your premiums up even more. 

Shopping Around

Once an insurer drops you, it’s smart to take a look around at other companies. Remember that your rates may or may not have gone up afterward. You’ll want to shop around and compare quotes between each insurance company so that you get the best deal. This is especially important if you need high-risk insurance, or if your rates have gone up.

Remember that the cost of your car insurance will depend on different factors. Each company comes up with your rates in its own way. These factors usually are:

Frequently Asked Questions

Q: How many claims can you file until your insurance company cancels your policy?

A:  There isn’t a specific number of accidents that insurers give you to cancel your policy. Having more than two at-fault accidents in a short time span (such as about three years) can put your policy in jeopardy. This is because insurers will view you as high-risk and will be prone to drop you.

Q: What happens when your insurance company cancels your policy?

A: Insurance companies must give you advance notice before dropping your policy. This is usually a 30-day notice. Once this happens, you will be without insurance. You’ll have to start finding other solutions because you shouldn’t drive without insurance.

It’s also smart to lower your risk if you’re a high-risk driver. You can do this by:

  • Taking a defensive driving course
  • Rebuilding your credit score
  • Avoiding mistakes while driving
  • Buying a safer vehicle

Following these steps will lower your insurance rates in the long run. It will also make it so you can buy insurance more easily.

Q: Can you reinstate a canceled insurance policy?

A: Yes, you can. This is usually something you can do when you’ve missed payments. The best thing to do is to call your insurer and ask about reinstating or renewing your policy. Normally, this means you’ll have to pay any past balances that are due before reinstatement.

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