Why Do Car Insurance Companies Cancel Policies?
Have you ever felt like your car insurance company was using you? In certain cases, that feeling is justified, especially when your car insurance company cancels your policy.
There are many reasons why car insurance companies could cancel your policy, from something as simple as forgetting to pay your premiums to more serious offenses like a DUI conviction.
Let’s dive into some of the causes for cancellation, and how you can avoid losing your car insurance coverage.
Why do car insurance companies cancel policies?
Most car insurance policies last until your term expires, when your insurer can decide to renew your policy or not. Sometimes car insurers won’t renew your policy if you’ve had too many accidents,filed too many claims, or made a serious violation (i.e. you were caught driving under the influence).
All insurers have the right to cancel your policy during the underwriting period, typically during the first 60 days of your policy. But in other more serious instances, your insurer can outright cancel your policy before your term expires.
If your insurer cancels your policy, they still have to notify you of the cancellation between 10 to 45 days before your coverage officially ends, depending on the state. This notice is required so you aren’t put in a position where you drive without insurance.
Why your car insurance wasn’t renewed
If you’re wondering, “Why did my insurance drop me after that claim?” it’s likely that your insurer chose not to renew your policy.
Most car insurance policies last between 6-12 months. At the end of that term, your insurer can decide if they want to keep insuring you for the same amount or increase your insurance rates.
If you’ve become riskier to insure, they may also choose to not renew your insurance policy.
Car insurers may not renew your policy if you:
- Let your coverage lapse
- Got into too many accidents or gotten too many tickets
- Filed too many insurance claims
- Got new moving violations or serious offenses listed on your driving record
- Live in a state your insurer no longer operates in
- Bought a new car
It may not always be your fault if your insurer chooses not to renew your policy, but you will need to shop around to find new insurance if this happens. And if you ever want more details as to why your policy was canceled, always contact an insurance agent.
When can a car insurance company cancel your policy?
Car insurance cancellations are much more serious than nonrenewals. So what would make an insurance company drop you?
You didn’t pay your premiums
This is the most common reason why your car insurance policy will get canceled. Like with any other bill, you need to pay your car insurance premiums on time. Most insurers have a grace period for payments, but if you’re consistently paying your premiums late (or not at all), your insurer may choose to cancel your policy altogether.
Letting your policy lapse due to nonpayment also shows future insurers that you’re a high-risk driver, making it harder to to get an affordable car insurance payment
You moved to another state without telling your insurer
Where you live and drive affects how much your car insurance costs—the riskier the area, the more expensive your insurance will be. If you move, especially to a different state, you need to let your insurer know. Why? Your insurer may not operate in your new state, or may need to adjust your premiums.
It’s not a good idea to move without telling your insurer. For one, you’ll typically need a new insurance policy when registering your car in your new state. Plus, if you get into an accident or get a ticket and your insurer discovers you live in a new state, they may cancel your policy.
Some insurers also consider this a form of insurance fraud.
You lost your driving privileges
If you’re not allowed to drive, your insurer will likely cancel your policy. And there’s a whole host of reasons why you may lose your driving privileges:
- Your license or vehicle registration was recently revoked or suspended
- You don’t hold a valid license
- Your car isn’t considered safe to drive
- You have a medical condition that prevents you from driving
Even if you’re not currently able to drive, it’s still important to maintain your car insurance. Most insurers consider lapses in coverage to be an additional red flag, and you typically need proof of an active car insurance policy to get your license reinstated.
You were convicted of a DUI
Some insurers will cancel a policy if the driver on the policy is convicted of a DUI or other serious driving offense. Not only can driving while drunk lead to your policy getting canceled, it can also cause car accidents and endanger people around you.
If you get into an accident while driving drunk, some insurers will deny your insurance claim, while others will pay the claim and cancel your policy. Not all insurers will cancel your policy if you’re convicted of a DUI, but most will significantly raise your premiums.
You committed insurance fraud
Insurance fraud includes situations where you aren’t honest to your insurer about yourself, your driving history, and how your car was used, in addition to:
- Having missing or inaccurate information in your insurance application, including your address, age, or type of car you drive.
- Filing a fake claim or inaccurate claim
- Using your car for business purposes, as most personal car insurance policies don’t cover business use
- Not disclosing that you’re an Uber or Lyft driver
Insurance fraud isn’t just a cause for cancellation—it’s also illegal. In some situations, your insurer may launch an investigation and pursue criminal charges against you.
What you can do to make sure your policy isn’t canceled
Effective communication is essential. If you’re worried a recent incident, like a DUI or missed payment, will lead to your policy being canceled, you should contact your insurance company as soon as possible.
If the issue is a nonpayment, you may be able to continue your coverage by paying a late fee. If you're struggling to make your payments, reach out to your insurer and see if there's a way to work something out.
To avoid getting your policy canceled in the future, there are a few things you can do:
- Make sure your insurer is aware of any changes or life events, like moving to a new address
- Pay your premiums on time
- Review your policy regularly to ensure it’s still providing the right coverage
- Drive safely and obey all traffic laws to avoid tickets or accidents
- Avoid filing a ton of claims, especially if it’s just for minor damage
What to do if your policy is canceled
If your insurance is canceled, you need to find coverage from a new insurer before your policy officially ends. Most states require a minimum level of car insurance coverage, making it illegal to drive without car insurance.
Not only will you get dinged for having lapsed insurance, you may face more serious consequences like a suspended license, fines, or jail time.
While you should be able to get car insurance after a cancellation, keep in mind that you’ll likely have to pay higher premiums.