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Having car insurance coverage is required in most states. However, sometimes even when you have purchased a policy, your car insurance policy can be canceled or nonrenewed. Understanding the situations in which an insurance company could cancel or choose to not renew your policy may be important so that you can take the steps to proactively avoid this from occurring. If your policy is canceled, this overview will also explain how to reinstate the necessary coverage to get you back on the road in as little time as possible.
Can car insurance companies drop you?
Car insurance companies can cancel, or “drop” your coverage, although you will typically be given enough notice to obtain a new policy. Your car insurance company will likely send you a letter explaining why your coverage has been dropped. If the company neglects to explain its reasoning, you may want to contact your agent or a customer service representative to find out why your policy is being canceled.
Your auto insurance policy could be canceled if:
- You neglected to pay your premium.
- Your driver’s license was suspended or revoked.
- You were not honest on your application.
If your policy has been in force for fewer than 60 days, there may be more scenarios that could lead to cancellation.
What can you do after your auto insurance is canceled?
If you have received an auto insurance cancellation letter, your first step may be to understand why your policy is being canceled and how long you have to find replacement coverage. Your insurance company is required to contact you in advance of any cancellation so that you have time to find a new policy. The amount of notice you get may depend on the regulations in your state.
If your car insurance coverage is dropped, you may want to try the following steps:
- See if your provider is willing to consider reinstating your coverage. “If you can work it out with the insurance company to be reinstated, that’s usually the first step most people want to take,” advises Amy Bach, executive director of United Policyholders, an insurance consumer group in San Francisco. Contact your insurance provider, determine the reason for the cancellation and ask if the coverage can be reinstated easily. Sometimes something as simple as taking care of a late payment can get your coverage back on track.
- Write a letter asking your insurer to take you back. Your state may be able to help. For example, in Illinois, you could seek the help of the Department of Insurance, which holds hearings for insurance appeals. This may be helpful if your policy is being canceled or nonrenewed due to excessive claims or a complicated driving record.
- Look for a new insurance provider. If the insurance company declines to keep your policy, you may want to begin searching for a new insurance provider by gathering quotes from several carriers. This is why it is important to know when your policy is going to end, so you can get coverage before you have a lapse.
What is the difference between a policy cancellation and a nonrenewal?
The key difference between an auto insurance cancellation and a nonrenewal is the timing. Insurance policies are contracts that typically last between six months and a year. At the end of this term, your provider can decide whether or not to offer you a new contract. Nonrenewal means the insurer decides not to offer you further coverage at the end of your term. The provider is usually required to send you a notice of nonrenewal a certain number of days before the end of your policy to give you time to shop for new coverage.
There are many reasons insurers can choose not to renew your coverage, but here are a few of the most common:
- You were cited for drunk driving or other serious driving infractions.
- You have made too many claims, particularly from accidents you caused.
- The company has decided to discontinue offering coverage in your area.
On the other hand, an insurance cancellation means that your policy is canceled at any time other than the renewal date. Cancellations can only happen for very specific reasons. Once you purchase a policy, the insurance company usually has 60 days to decide not to offer you long-term coverage by issuing a cancellation. After that, there are typically only three reasons an insurance policy can be canceled:
- You have not paid your premiums, causing a lapse in coverage.
- You committed fraud or lied on your insurance application.
- Your driver’s license has been suspended.
In the table below, Bankrate’s insurance editorial team has outlined the key differences between policy cancellations and nonrenewals:
|Time frame||Within the first 60 days of coverage or for a specific reason||At the end of your policy term|
|Notice required||Depends on the reason for cancellation||Depends on the state; usually 30 to 60 days|
|Reason for termination||Must be due to nonpayment, fraud or license suspension if after 60 days||Variety of potential reasons including number of claims filed, credit score change or carrier coverage area change|
Can you fight a car insurance policy cancellation?
You can challenge your car insurance company after receiving a policy cancellation notice. You could first call your insurance company to discuss whether your insurer might be willing to keep your policy. Depending on the reason for your cancellation, you may be able to reach an agreement with your carrier.
However, if contacting the company proves unsuccessful, you may want to contact your state insurance department to file a complaint if you believe your policy has been canceled unfairly. Depending on the state, you may be protected from cancellation for specific reasons, such as your age. The state insurance department might investigate to see if the cancellation was justified.
Will it be more difficult to get insurance if you get dropped?
Unfortunately, if your car insurance company drops your coverage, getting another policy could be difficult and expensive, depending on the reason for your cancellation. The reasons that often lead to the cancellation, such as a license suspension, may be viewed by other insurance companies as evidence of high-risk behavior, which generally leads to higher costs of car insurance.
However, some companies offer high-risk auto insurance, so a policy cancellation as a result of a driving incident does not necessarily mean you will not be able to find replacement coverage. Although your premium may be higher if you have accidents, tickets or a DUI conviction, you will likely still be able to find some form of coverage to meet state minimum requirements.
If you are unable to line up a new policy with another insurance company, you may be able to get coverage through your state’s “assigned risk” program. This type of auto insurance is typically available to high-risk drivers who have trouble buying a policy in the private market.
Frequently asked questions
The best car insurance likely depends on your financial situation, where you live, your driving history and your preferences. If you have been dropped from coverage and you are looking for a new policy, you may want to get quotes from several companies to find an option that fits your needs. However, be aware that if you are being dropped from your current carrier for high-risk driving behaviors, it is likely that you will face higher premiums with other carriers as well.
Technically, yes you can cancel your auto insurance policy at any time, but some carriers may charge fees for policies canceled before the end of the policy term. Additionally, insurance experts advise that you should only cancel a policy if you have canceled your registration at your state’s department of motor vehicles or if you purchased a policy with another company that will become effective on or before the cancellation day. If you choose to cancel your policy and drive without insurance, you could be violating state laws and risk a variety of penalties that range from costly fines to license suspension.
Yes, you will likely be able to find coverage again if your carrier dropped your policy. When doing so, it’s important not to intentionally hide your canceled coverage status from your new insurer. Misrepresenting an insurance application can lead to having your policy canceled all over again. If you are unable to find auto insurance coverage from a private carrier, you may need to reach out to your state’s department of insurance to discuss your options for coverage.
A no-loss statement is an agreement that an insurance provider may have you sign to validate that your vehicle has not undergone any damage or loss that could lead to you filing a claim on that vehicle between the point your policy was canceled and the point you petition for reinstatement.
How long it takes for an insurance policy to be canceled for non-payment depends on the company and its billing policy. Car insurance companies must notify you prior to canceling the policy. Each state has different notice periods, but it is typically at least 10 and as much as 20 days. You usually have a grace period before the notice goes out, so if you realize you’ve missed a payment, be sure to make it as soon as possible to avoid being canceled for non-payment.