Dropped: The Auto Insurance Edition

There are a number of reasons why your auto insurance company might drop you, but it's an uncommon occurrence. Auto insurance companies are in the business of making money, and they do so by hedging against risk. So, while one accident could result in a higher premium, if your recent driving record is littered with accidents, speeding tickets, and other moving violations, insurers are likely to categorise you as a high-risk driver.

Insurers can cancel policies or choose not to renew at the end of a policy term. Non-renewal can occur after multiple accidents or filing too many claims. More immediate cancellations can result from serious issues like loss of driving privileges, DUI or DWI convictions, or insurance fraud.

DUI/DWI convictions

A DUI or DWI conviction can have serious consequences for your auto insurance. A DUI (driving under the influence) or DWI (driving while intoxicated) conviction will likely result in your insurance company dropping you as a client. This is because insurers view those with a DUI or DWI on their record as high-risk drivers.

Even if your insurance company doesn't drop you, you will likely face significantly higher insurance premiums. Your rate will go up, with the increase depending on factors such as your age, driving history, and the amount of time that has passed since the DUI or DWI. On average, insurance rates increase by 74% after a DUI or DWI conviction. In some states, your insurance company may be required to file an SR-22 or FR-44 form with the state, certifying that you have proper car insurance. These forms are typically required for high-risk drivers and come with an additional fee.

The length of time that a DUI or DWI will remain on your record varies by state. In most states, it will stay on your record for three to five years, but in some states, such as California, it may remain for up to 10 years or even permanently. During this time, you may struggle to find a new insurance provider and will likely have to pay higher rates.

If you are convicted of a DUI or DWI, it is important to take steps to mitigate the impact on your auto insurance. This may include shopping around for a new insurance provider that accepts drivers with DUI or DWI convictions, such as Progressive, or improving your driving record over time to demonstrate lower risk.

Loss of driving privileges

Firstly, it's important to understand that loss of driving privileges can result from a variety of factors, including legal, medical, or administrative reasons. For example, a conviction for Driving Under the Influence (DUI) is a common reason for driver's license suspension, revocation, or cancellation. Each state has its own DUI laws and penalties, but you can generally expect license suspension if convicted, with the length of suspension depending on factors such as blood alcohol content (BAC), age, and whether there was an accident involving injury or death. Refusing to submit to a breath test can also result in an automatic license suspension in many states, regardless of age.

Other traffic violations that can lead to loss of driving privileges include leaving the scene of an accident, reckless endangerment in a road construction zone, eluding a police officer, driving without insurance, committing a felony with a motor vehicle, vehicular assault or manslaughter, and having an unattended child in a running vehicle. Additionally, states that employ a point system for traffic violations may suspend or revoke licenses when a certain number of points are accumulated. For example, California drivers can face license suspension with six points within 24 months.

Medical conditions that affect your ability to drive safely can also result in loss of driving privileges. This could be due to physical or mental health issues that impair your driving abilities. In such cases, a medical professional's assessment may be required to determine your fitness to drive.

The consequences of losing your driving privileges extend beyond just your auto insurance. For example, driving without insurance in states like California and Pennsylvania can result in fines, vehicle impoundment, and even suspension of your driving privileges for up to four years if you are a repeat offender. Additionally, your auto insurance rates may dramatically increase after a lapse in coverage.

To avoid losing your driving privileges, it's essential to follow driving laws and maintain valid auto insurance coverage. If you face a suspension or revocation of your license, there may be options to appeal the decision or apply for a restricted license, depending on the state and circumstances. Maintaining a clean driving record and safe driving habits will help minimize the risk of losing your driving privileges and the associated consequences.

In summary, loss of driving privileges can have significant impacts on your auto insurance and driving capabilities. By understanding the factors that can lead to this situation, you can take proactive measures to maintain your driving privileges and ensure you have the necessary coverage in place.

Insurance fraud

In addition to the financial and legal consequences, insurance fraud also has a significant impact on insurers and consumers. It costs insurers billions of dollars in losses, which are often passed on to drivers in the form of higher premiums. According to the FBI, insurance fraud costs the average family between $400 and $700 every year in premiums.

Florida and New York have the highest rates of auto insurance fraud in the US, according to the Insurance Research Council. Staged accidents, counterfeit airbags, windshield replacement scams, and towing scams are common types of fraud that drivers should be aware of. By practising defensive driving, being vigilant, and verifying the legitimacy of agents and companies, drivers can reduce their risk of falling victim to insurance fraud.

Filing excessive claims

Filing excessive auto insurance claims can lead to your insurance provider dropping you. While insurance companies rarely cancel coverage after a single accident, they may do so if you have a pattern of filing excessive claims. This is because insurers consider excessive claims as high-risk behaviour, and once you are deemed too high-risk, they may opt to drop you as a customer.

Insurers may first increase your car insurance rates after you file a claim. If you continue to file multiple claims or have additional accidents, the insurer may choose not to renew your policy. This means that you can keep your policy until the end of the term, but you will not be able to renew it once it expires.

To avoid being dropped by your insurance company, it is recommended that you practice safe driving habits and pay your insurance premiums on time and in full.

It is important to note that the number of claims that is considered excessive may vary between insurance providers and states. However, experts generally advise against filing more than one claim per year to avoid the risk of your insurance policy being cancelled.

Nonpayment of insurance premiums

Insurers will often charge a late fee for missed payments. If late or missed payments become a pattern, the insurer will likely cancel your policy. This is because the insurer can't be sure that you'll pay your premium, making you a riskier client to insure.

Some insurers offer a grace period for late payments, typically ranging from 10 to 30 days past the due date. After this grace period, your coverage will lapse, and you will be without insurance. If you have health insurance through an employer, they may withhold the premiums from your salary and remit them to the insurer.

If you are having trouble affording your insurance premium, there are proactive steps you can take. Contact your insurance company to clarify your grace period and shop around for a more affordable insurance policy. You can also explore financial options like tweaking your budget or increasing your income to ensure you can afford your premium payments.

Frequently asked questions