Did you get a letter from your insurer saying they’ll cancel your car insurance in the next 30 days? This can be an alarming and confusing message. If you just received this news, you must take immediate action to ensure you maintain coverage. Luckily, you have a few options after receiving this cancellation or non-renewal notice:
- High-risk insurance
- Personal bonds
- Following a state program that can help you
There are many different reasons that companies might end, deny, or not renew your policy. The three main ways are:
- Cancellations
- Denial of coverage
- Non-renewals
This article will tell you how and why providers drop your policy. We’ll also tell you about how you can re-acquire car insurance. This includes how you can get back in your insurer’s good graces.
How Insurers Cancel Policies or Deny Coverage
A car insurance company may choose to stop doing business with you, but they often do so in a few different ways. The main ways that insurers 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 carriers can cancel your car insurance and why it happens:
Cancellations
A cancellation means that your provider has decided to terminate your policy immediately. This could happen for any number of reasons. According to the Insurance Information Institute (III), an auto insurer can’t cancel your policy after 60 days 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 companies the right to cancel policies. Other reasons that often cause cancellations are:
- Your car isn’t safe. Your provider can cancel if your car is unsafe or if it fails an inspection.
- You’re high-risk or have too many accidents/tickets. Having too many car accidents and moving violations on your record can result in carriers canceling your insurance. Lots of accidents mean lots of claims. This can also mean you’re a high-risk driver, which can make insurers think twice before offering you coverage.
- You use your car for ridesharing purposes. Driving passengers around for services like Uber or Lyft without telling your insurer can cause a cancellation. Delivery gigs like DoorDash and Instacart also apply here. This is because you’re using your car for purposes other than what you’ve told your carrier. To avoid losing coverage, you’ll need a special rideshare policy or commercial insurance.
- 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 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 provider can cause them to cancel your policy.
Remember, a cancellation means your car insurance company is terminating your policy ASAP. Insurers 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 won’t cover you with a policy. This is different from cancellations or non-renewals because insurers don’t even let you get your foot in the door.
Here are common reasons why a car insurance company might deny you coverage:
- You’ve committed fraud
- Your car doesn’t meet your state’s safety requirements
- You’re a high-risk driver or have too many car accidents or moving violations
- An insurer has canceled your coverage within the last two years
- The state has revoked or suspended your driver’s license
The reasons for insurers to deny you coverage have to do with your track record as a driver and customer. Car insurance companies shy away from people that they believe to be high-risk or a liability.
Non-Renewals
A non-renewal means that either you or your provider choose not to renew your 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 many 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 company is dropping your type of car insurance or isn’t covering people in your area
Companies might not tell you why they’re not renewing. 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 Your Policy Is Canceled?
Losing your auto policy can leave you feeling helpless or confused. There are consequences you should know of before figuring out your next move. For instance, losing your coverage can affect future rates or your ability to get a policy. If nothing else, you’ll have a lapse in coverage, which no insurer likes.
Below is an explanation of what you need to know after losing your car insurance:
Your Insurer Might Tell the DMV
Insurers inform the Department of Motor Vehicles (DMV) if they cancel your policy. The law requires providers to notify the DMV if they cancel it. They may also do the same if you have a non-renewal. This is because states don’t want people to drive without car insurance.
It’s a Bad Idea to Drive Without Coverage
Driving without car insurance is a bad idea. Doing so can get you into financial and legal trouble. You run the risk of paying for accident expenses out of pocket even if you aren’t at fault.
Most states require drivers to carry a minimum amount of auto insurance. New Hampshire and Virginia are the only states that don’t explicitly require coverage. Getting behind the wheel without a policy in place is a violation of the law everywhere else. Here’s a list of some things that can happen to you if you drive without car insurance:
- Fines
- License suspension
- Must pay out of pocket for accidents 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 After It’s Canceled
Losing your auto coverage doesn’t mean you should go on without it. There are ways to protect yourself after an insurer cancels or non-renews your policy. These are some of the most common ways to maintain coverage:
High-Risk Insurance
Companies almost always cancel the policies of high-risk drivers. This means you have too many tickets and/or accidents on your driving record to remain covered by a standard auto policy. That leaves non-standard car insurance as your only option if you want to keep driving legally.
Some companies will offer high-risk coverage for people who need it. States also offer risk pools where they’ll assign an insurer to you. Be aware that a non-standard policy costs much more than regular insurance. But it’s better than nothing in this situation.
Personal Bond or SR-22 Form
A personal bond or SR-22 form to prove lawful coverage may be necessary. It isn’t a type of insurance. Rather, it’s a certificate that states or courts require for certain drivers. This form certifies that your liability coverage satisfies your state’s minimum requirement. Be aware that having an SR-22 can tell insurers that you’re high-risk, driving your rates up even more.
Shopping Around for a New Provider
Once an insurer drops you, it’s savvy to look 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 insurer to get the best deal. This is especially important if you need high-risk coverage, or when your rates go 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.
Common rate factors include the following:
- Gender
- Marital status
- Car mileage
- Age
- Where you live
Frequently Asked Questions
How many claims can you file until your insurer cancels your policy?
There isn’t a specific number of car accidents and claims that insurance companies allow before they cancel your policy. Having more than two at-fault accidents in a short period (about three years) can jeopardize your status with them. This is because insurers will view you as high-risk and will be prone to drop you.
What happens when your provider cancels your policy?
Insurers must give you advance notice before canceling your policy. This is usually a 30-day notice. Once this happens, you’ll be without coverage, leaving you to find other solutions because you shouldn’t drive without auto 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 rates in the long run. It will also make it so you can buy car insurance more easily.
Can you reinstate a canceled auto policy?
Yes, you can. This is usually something you can do when you’ve missed payments. The best thing to do is ask your insurer about reinstating or renewing your policy. Normally, this means you’ll have to pay any past balances that are due before reinstatement.
