Auto Claims: Insurance Cancellation Risk

It's unlikely that your insurance company will cancel your policy due to multiple auto claims. Instead, they will typically refuse to renew your policy. This is called a non-renewal. Your insurance company might decide not to renew your policy if you have multiple at-fault claims, tickets, or moving violations. They might also refuse to renew if you have received a DUI or DWI, bought a new car that is too risky to insure, or moved outside of their coverage zone.

However, insurance companies can cancel your policy for other reasons, such as non-payment, misrepresentation on your application, or filing a fraudulent claim.

Reasons for car insurance cancellation

Car insurance companies can cancel your policy for several reasons. Firstly, if you don't pay your premiums on time, your insurer may cancel your policy. This also applies if you make too many missed payments or fail to pay at all. Secondly, any changes to your risk profile may result in cancellation. This includes accumulating traffic tickets, making frequent at-fault claims, or changes to your vehicle, location, or status that increase its value or risk of theft. For example, using your car for pizza delivery or moving to a neighbourhood with a higher risk of theft. Thirdly, providing false information, such as misrepresenting your vehicle or failing to update personal details, can lead to cancellation. This also applies if you intentionally damage a covered asset or pose a "moral risk". Finally, your insurance company may cancel your policy if you have no "financial interest" in the insured vehicle, or if they stop servicing your region or shut down.

Reasons for non-renewal

While it is uncommon for insurance companies to cancel your coverage due to multiple claims, they may choose not to renew your policy when it is up for renewal. Here are some reasons why an insurance company may decide not to renew your policy:

• Too Many Claims: If you have made multiple claims, regardless of fault, your insurance company may decide not to renew your policy. This is because insurers are in the business of making money, and if they are paying out more in claims than they are receiving in premiums, they may view you as a financial risk.
• At-Fault Claims: If you have made multiple claims that were your fault, this can be a significant reason for non-renewal. At-fault claims are considered worse than no-fault claims and can lead to higher rates or non-renewal.
• Moving Violations and Tickets: Accumulating multiple moving violations or tickets can also lead to non-renewal. This is because a history of speeding tickets, reckless driving, or other violations indicates risky driving behaviour, and insurance companies may not want to take on the increased risk.
• DUI/DWI: If you have been convicted of driving under the influence (DUI) or driving while intoxicated (DWI), your insurance company may decide not to renew your policy. This is because a DUI/DWI conviction significantly increases your risk profile, and insurers may view you as a liability.
• New High-Risk Vehicle: If you purchase a new vehicle that is considered too risky to insure, your insurance company may choose not to renew your policy. This could be due to the vehicle's high performance, poor safety record, or other factors that increase the likelihood of a claim.
• Moving Outside of Coverage Zone: If you move to an area that is outside of your insurance company's coverage zone, they may decide not to renew your policy. This is because insurance companies typically have specific geographic areas that they serve, and they may not be licensed or able to provide coverage in your new location.

It is important to note that insurance companies are generally forbidden from dropping clients for certain reasons, such as age, race, gender, marital status, disability, or occupation. If an insurance company chooses not to renew your policy for any of these reasons, it could be considered discrimination.

How to avoid multiple claim penalties

While it's unlikely that your insurance company will cancel your coverage due to multiple claims, they might refuse to renew your policy or raise your rates. To avoid multiple claim penalties, you can follow these steps:

• Drive with caution: Avoid distracted driving, stay off the roads in bad weather, park your car in a garage or under a carport, and keep your car well-maintained.
• Pay for minor claims out of pocket: Dealing with one claim at a time is less stressful and cheaper than filing multiple claims. Paying for minor repairs yourself can also prevent insurers from viewing you as a high-risk driver, which could lead to higher rates.
• Be aware of the difference between cancellation and non-renewal: Cancellation means your insurer ends your policy before the term is over, usually within the first 60 days if you provided false information on your application or if you fail to comply with the terms of your policy contract or pay your premium. Non-renewal, on the other hand, refers to being dropped by your insurer at the end of your payment term, which can happen if you file too many claims or fail to pay your premium.
• Understand how claims history is used: Insurance companies use your claims history to determine your premium and whether you qualify for insurance. The frequency of claims matters more than the severity, and some companies only consider claims that meet a minimum dollar threshold.
• Practice defensive driving and store your car securely: By taking precautions to avoid accidents and storing your car in a secure place, you can reduce the likelihood of having to file a claim.

What to do if your policy is cancelled

While it is highly unlikely that an insurance company will cancel your car insurance due to multiple claims, it is not unheard of. If your car insurance policy has been cancelled, there are several steps you can take to get back on the road.

First, contact your insurance company to see if they will reinstate your policy. If you missed a payment, many insurance companies offer a grace period during which you can make the payment and have your coverage reinstated. If you lied on your application or filed a fraudulent claim, your insurance company may not be so forgiving, but it is still worth asking.

If your insurance company won't reinstate your policy, you will need to purchase a new one. Start by getting quotes from several insurance companies and comparing rates. You may need to look at companies that insure high-risk drivers, as some insurers will not offer coverage to drivers with a lapse on their record. If you are still having trouble finding a policy, you can join your state's assigned-risk pool as a last resort. States create these pools to ensure that even risky drivers have the minimum insurance required to drive legally.

To avoid having your policy cancelled in the first place, there are several things you can do:

• Pay your premium bill on time
• Don't lie about your claims
• Avoid making extra or very minor claims
• Drive with caution
• Keep your car in good condition

What to do if your policy is not renewed

If your auto insurance policy is not renewed, there are a few steps you can take to understand the reason for the non-renewal and find alternative coverage. Here's what you can do:

Understand the Reasons for Non-Renewal

Non-renewal occurs when your insurance company decides not to continue your coverage at the end of the policy term. It's important to note that non-renewal is different from cancellation, which is the termination of your policy before the end of the term. While cancellation usually happens within the first 60 days of the policy and can be due to issues like non-payment or fraud, non-renewal typically happens without any fault of your own. Common reasons for non-renewal include:

• Multiple at-fault claims or accidents on your record.
• Late car insurance payments.
• Moving to an area outside of your insurance company's coverage zone.
• Receiving a DUI or DWI.
• Too many traffic violations or tickets.
• Misrepresentation or providing false information on your insurance application.
• Your insurer deciding to reduce their number of customers in your area.

Review the Notice of Non-Renewal

When your policy is not renewed, your insurance company is required to send you a written notice explaining the reason for non-renewal. This notice should be sent to your last known mailing address, and it must clearly state the specific reason(s) for non-renewal. The time frame for receiving this notice varies by state but is generally between 30 to 60 days before the non-renewal date.

Appeal the Non-Renewal (if applicable)

In some cases, you may have the right to appeal the non-renewal decision. This option depends on the specific circumstances and your location. For example, if you believe your insurance company failed to follow the required steps in cancelling your policy, you may have grounds for an appeal. Contact your insurance company or your state's insurance department to understand your rights and the process for appealing a non-renewal.

Shop for Alternative Coverage

If your policy is not renewed, you will need to find alternative coverage to ensure you remain insured. Start by determining the level of coverage you require and researching reputable insurance companies that can provide the necessary coverage. Compare quotes from multiple companies, considering factors such as price, customer service, and claims handling. It's important to set the effective date of your new policy to be the same day your old policy expires to avoid any gaps in coverage.

Frequently asked questions