Jane Dotson
Auto insurance companies can drop you, but it's rare for them to do so after a single claim. They are, however, more likely to drop you after a claim if you are a high-risk driver. Auto insurance companies can also drop you for reasons such as DUI or DWI convictions, loss of driving privileges, insurance fraud, non-payment of premiums, and filing excessive claims.
| Characteristics | Values |
|---|---|
| Reasons for cancellation | Non-payment or late payment of insurance premiums, DUI/DWI conviction, Loss of driving privileges, Insurance fraud, Filing excessive claims, Unsafe vehicle, Business use of vehicle, Non-disclosure of necessary information |
| Notice period | Varies by state and reason for cancellation, typically between 10-45 days |
| Appeal process | Contact insurance company to resolve the issue or appeal the decision; contact state department of insurance if cancellation is unfair or unlawful |
| Consequences of cancellation | Increased insurance rates, difficulty finding new insurance, legal and financial consequences for driving without insurance |
What You'll Learn
DUI/DWI convictions
A DUI/DWI conviction can have serious consequences for your auto insurance. Many insurance providers will drop a driver who has been convicted of driving under the influence (DUI) or driving while intoxicated (DWI). Those with DUI/DWI convictions are considered high-risk drivers, which can lead to policy cancellation or significantly higher insurance premiums.
If your insurance provider decides not to drop you after a DUI/DWI conviction, you can still expect your insurance rates to increase. On average, a DUI conviction leads to an 80% hike in annual insurance premiums. The duration of the rate increase depends on the state you live in and your insurance company. In most states, a DUI conviction stays on your driving record for three to five years, but it can remain for up to ten years in California.
After a DUI/DWI conviction, you may be required to file an SR-22 form, also known as a Statement of Responsibility. This form is a certificate of financial responsibility that confirms you have the minimum insurance coverage required by your state. Not all insurance companies offer the option of filing an SR-22, and those that do will typically charge high premiums for basic coverage.
To find insurance coverage after a DUI/DWI conviction, you may need to comparison shop and expect to pay higher premiums. Some companies, such as Progressive, specialise in insuring high-risk drivers and will file an SR-22 on your behalf if necessary.
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Non-payment of premiums
Most insurers offer a grace period of around 10 to 25 days to allow you to make your payment without a lapse in coverage. After this grace period, your policy will lapse, and you will be driving uninsured. Driving without insurance is illegal in most states and could result in fines or a license suspension.
If your policy has already been cancelled due to non-payment, you can ask your insurance provider to reinstate it. You will need to pay the balance you owe, plus a reinstatement fee. However, your insurance company might decide not to reinstate your policy, or you could end up paying higher rates than before.
To avoid cancellation due to non-payment, consider setting up automatic payments so that the money is automatically drafted from your bank account each month. You might also be able to get a premium discount if you pay your entire annual premium upfront or enrol in autopay.
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Excessive claims
Insurers are more likely to increase premiums after the first one or two incidents rather than drop a customer immediately. However, if a customer continues to file excessive claims, the insurer may decide not to renew the policy at the end of its term.
To avoid being dropped by an insurance company, it is recommended that customers drive safely, pay their premiums on time and in full, and only file necessary claims.
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Driving without a valid license
The implications for your auto insurance depend on the severity of the traffic violation. If you simply forgot your license at home, you are unlikely to face any auto insurance penalties. However, if your license was suspended and you were caught driving, your insurer will view this as risky behaviour and may significantly increase your premium. If the initial reason for the suspension was a DUI-related offence, you may be subject to even harsher penalties, including the requirement to file an SR-22 form, which confirms that you carry the minimum coverage required by your state. Obtaining auto insurance with a history of driving without a valid license can be challenging and expensive, as you will be considered a high-risk driver.
To mitigate the impact on your auto insurance, you can take several steps to prove that you are a careful and safe driver. This includes demonstrating a change in behaviour, taking a defensive driving or safe driving class, and waiting for your driving record to improve over time. It is important to remember that driving without a valid license is not only dangerous but can also result in costly consequences and difficulties in obtaining affordable auto insurance.
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Fraudulent claims
Hard fraud includes deliberately causing property damage, faking an accident, or feigning theft to claim insurance money. Soft fraud, on the other hand, involves exaggerating legitimate damage to obtain a larger payout or providing misleading information to lower insurance costs.
Insurance companies can cancel policies for fraud, and they are required by law to provide notice of policy cancellation and reasoning. If your insurance company discovers a fraudulent claim, they will cancel your policy and may inform law enforcement. Depending on the level of fraud and the state's laws, you may face misdemeanour or felony fraud charges.
To avoid being dropped by your insurance company, be honest when providing information and making claims. Drive safely, pay your premiums on time, and only file necessary claims.
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Frequently asked questions
It is rare for an insurance company to drop you after a claim. However, they can cancel or choose not to renew your coverage, provided they give you notice.
Driving without car insurance is illegal in all states except New Hampshire and Virginia. If caught, you could face penalties, fines, license suspension, and even jail time.
A policy cancellation means an insurance company can cancel your policy at any time without notice within the first 60 days. After 60 days, they must provide a reason and notice before cancelling. Non-renewal means your insurer decides not to renew your policy after it expires, and they must also provide notice for this.
Insurance companies can drop you for any reason within the first 60 days of the policy, but they must provide notice before doing so. After 60 days, they will need to provide a valid reason and notice.
If your car insurance is cancelled, you will need to shop for a new insurance company. You will likely face higher rates with a new insurer due to being seen as a higher risk.
