You reach into your mailbox and retrieve a letter from your auto insurance company. It says you and your car are being kicked to the curb. At first, you may feel completely blindsided and wonder, “Can my car insurance drop me like this?”
The bad news is that yes, it can – but that doesn’t mean you’re out of options. We’re here to explain what happens if your car insurance is canceled and how to get coverage back in the event of a cancellation.
Can car insurance companies drop you?
If the reason you’ve been dropped from coverage isn’t apparent in the letter from your insurer, you should contact the company to find out why your policy is being canceled.
Some of the common reasons your auto policy could end up canceled include:
- You neglected to pay your premium.
- Your driver’s license was suspended or revoked.
- You weren’t entirely honest on your application.
Additionally, if your policy is brand new, your insurer may cancel you for any reason. States allow only a short amount of time for this, usually within the first 60 days, according to the National Association of Insurance Commissioners.
What can you do after your auto insurance is canceled?
Find out how much time you have. Your insurance company is required to contact you in advance of any cancellation so that you’re not completely blindsided. The amount of notice you get depends on the rules in your home state.
- See if there’s anything you can do to have the decision reversed. “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.
- Write a letter asking your insurer to take you back. See if your state can help. For example, in Illinois, you can appeal to the state Department of Insurance, which holds hearings on this stuff.
- Shake it off. If the insurance company seriously won’t budge, it’s time to shop around. Gather several quotes from reputable car insurance companies. And don’t drag your feet, Bach cautions. “It’s best not to wait to shop because sometimes it can take a while to get (insurance), and you want to be in the driver’s seat and not be scrambling last minute to put insurance in place before (your current policy) expires,” she says.
What is the difference between a policy cancellation and nonrenewal?
The key difference between an insurance company not renewing your policy and dropping your coverage is the timing.
Insurance policies are a contract, and once that contract is up (typically after six months or a year), the company can decide not to offer you a new one without facing too much red tape. In this case, the insurer 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’ve made too many claims, particularly from accidents you caused.
- The company has decided to discontinue offering that type of coverage in your area.
On the other hand, insurance cancellation can only happen during certain periods of time or 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 only three reasons an insurance policy can be canceled:
- You haven’t paid your premiums.
- You committed fraud or lied on your insurance application.
- Your driver’s license has been suspended.
In summary, here are the key differences between policy cancellation and nonrenewal:
|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||Often caused by too many claims, driving infractions or changes in policy offerings|
Can you fight a car insurance policy cancellation?
Just because you’ve received a car insurance policy cancellation notice in the mail doesn’t mean that’s the final word. The first thing you should do is call your insurance company to ask for reconsideration. According to the Insurance Information Institute, most carriers have an internal consumer affairs division designed to assist with these matters.
However, if contacting the company proves unsuccessful, there are other resources available. The Insurance Information Institute suggests contacting 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 will be able to 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 you from coverage, chances are getting another policy will be difficult and expensive. The reasons that often lead to the cancelation, such as a license suspension, will be viewed by other insurance companies as high risk. A DUI on your record, for example, will send your rate up by $800 per year on average. That is if any company wants to offer you coverage at all.
If you’re not able to line up a new policy with another insurance company, you likely could get coverage through your state’s “assigned risk” program. According to the Information Insurance Institute, this type of pricey auto insurance is available to drivers who have trouble buying a policy in the private market.
Frequently asked questions
What is the best car insurance?
The best car insurance depends on where you live, your personal details and your driving history. Dropped from coverage and wondering where to look for a new policy? See our list of best car insurance companies for the latest information on who offers the best coverage.
Can I get coverage again if my carrier dropped me?
You can absolutely apply for insurance coverage again if your provider drops you. Just make sure you’re honest with the new company about the fact that you were dropped from coverage. Misrepresenting an insurance application can lead to having your policy canceled all over again.
What may cause the drivers insurance provider to cancel his or her policy?
There are only three reasons that an auto policy can be canceled: nonpayment of premiums, insurance fraud or license suspension. However, insurance companies can opt for nonrenewal for a wide variety of reasons, from risk avoidance to changing insurance offerings.