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Auto Insurance Cancellation and Non-Renewal - The Ins And Outs

April 19, 2010

Coping With A Cancelled Auto Insurance Policy

If your car insurance company cancels your policy, you'll find it difficult to secure coverage elsewhere. A lot of drivers underestimate the long-term effects of cancellation. They also misunderstand the circumstances that can lead to it. When it occurs, these people are forced to scramble in order to find another insurer willing to extend coverage.

With this in mind, we'll take a look at the most common reasons car insurance companies cancel their policyholders' contracts. A few may surprise you. We'll also share an important, yet often neglected, tip for making sure your policy remains in good standing.

Reasons Auto Insurers Cancel Policies

Fortunately, insurers are prohibited from arbitrarily cancelling their customers' policies. This provides you with reasonable assurance that you won't be randomly dismissed. That said, insurance companies can cancel your policy for several reasons - most are entirely avoidable.

First, you'll run the risk of cancellation if you falsify any of the information you provide your insurer at the time you submit your application. This information might include your driving record and the people you allow to use your vehicle.

Second, your policy may be cancelled if the insurer uncovers a previously unknown detail that changes their risk assessment during their vetting period. If this occurs, it is usually during the first two months of the contract.

Third, cancellation can happen if your license is revoked or suspended, thereby indicating you have lost your driving privileges.

There's a fourth reason that catches many policyholders by surprise: late payment of premiums...

Pay Your Premiums On Time

If you're on a limited budget, you might be tempted to push your auto insurance bill to the back burner. Be careful. Doing so could result in your policy being cancelled. A lot of motorists are surprised to learn their insurers have dismissed them because of late payments. It happens more often than most people realize.

In the event your policy is cancelled for nonpayment, you may be able to have it reinstated. But you'll likely be required to pay the entire premium upfront rather than make monthly payments. Moreover, your premiums will rise. To prevent these things from happening, make sure you pay your premiums in a timely manner.

How A Cancelled Policy Affects Your Insurance Options

The biggest challenge a cancellation poses is that it makes it difficult to purchase new coverage. Most car insurance companies consider a cancellation as a clear sign of a high-risk driver. Even if they are willing to extend coverage to you, your policy will almost always have significantly higher rates attached.

Another problem is that your credit history might suffer a negative mark if your policy is cancelled due to late payment. Insurers consider your premiums in the same manner as the payments for a credit card bill. Not only will they cancel your policy if you fail to pay your premiums, but they might also report the nonpayment to the credit bureaus.

Is Non-Renewal The Same As Cancellation?

Policyholders are occasionally told by their car insurance companies that their policies will not be renewed upon expiration. This is different than cancellation. The consequences associated with non-renewal are less severe.

Non-renewal can happen for many reasons, some of which lie outside your influence. For example, your insurer may stop offering a particular type of coverage. Your policy might also be allowed to expire without renewal if you have a long history of filing claims. Or, you may have received too many demerit points in too short a period. These reasons and others might discourage your auto insurance provider from continuing to extend coverage to you.

Being a responsible driver is one part of keeping your car insurance policy in good standing. But there are many other facets involved. If your insurer chooses to cancel your policy or decides against renewing it, look for alternative coverage (high risk car insurance) online. Compare multiple auto insurance companies side by side to find a package that fits your needs and your budget.

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