Avoid These Mistakes: Keep Your Auto Insurance Intact

Losing your auto insurance can be a result of a number of issues, some of which are outside of your control. There are two ways in which you might be dropped by your auto insurance company: non-renewal or cancellation. Non-renewal occurs when your insurer decides to part ways with you at the end of your policy term, which may be for business reasons or because they view you as a high-risk customer. Cancellation is more severe and happens when the insurance company decides to stop coverage before the end of your term. This usually occurs due to reasons such as misrepresenting yourself on your application, receiving license suspensions, being convicted of a DUI, having multiple accidents or moving violations, or not paying your premiums. It's important to note that insurance companies rarely cancel coverage after a single accident, and they must provide notice before dropping your coverage.

Non-renewal: Start shopping for a new policy

If your auto insurance company decides not to renew your policy, it's important to stay calm and start shopping for a new policy. Here are some detailed steps to guide you through the process:

Understand the Difference between Non-renewal and Cancellation:

Non-renewal occurs when your insurance company chooses not to renew your policy at the end of its term. This may happen due to various reasons, some of which might be unrelated to your driving record or behaviour. On the other hand, cancellation is more severe and occurs when the insurance company decides to terminate your policy before the end of the term due to specific issues with your behaviour or driving record.

Know Your State's Requirements:

The amount of advance notice your insurer is legally required to give you before non-renewal varies by state. For example, in California, insurers must provide a written notice of non-renewal at least 30 days before the policy ends, or 20 days before if the reason is non-payment. Check your state's requirements to understand the timeframe you have to work with.

Start Shopping for a New Policy:

Begin looking for a new insurance provider as soon as you receive the non-renewal notice. This is a good opportunity to compare rates and find a better deal with another company. Remember, non-renewal does not carry a stigma, and you won't necessarily pay higher rates at another company unless the non-renewal was due to a serious offence.

Contact Your Insurer for Clarification:

If you feel the non-renewal was unfair or unexpected, reach out to your insurance agent or company to ask for more details. In some cases, there may be a misunderstanding or an issue that can be easily resolved. It's worth clarifying the situation before moving on to a new insurer.

Complain to Your State Insurance Department:

If you believe your insurer is treating you unfairly, you have the right to file a complaint with your state insurance department. They can provide guidance and help ensure your rights as a consumer are protected.

Explore Nonstandard Insurance Options:

If you're unable to resolve the non-renewal and are having difficulty finding coverage from standard insurance carriers, consider the nonstandard insurance market. This market serves drivers with issues like application misrepresentation, payment or driving history problems, bad credit, or lapsed coverage. Specialty insurers and divisions of major insurance companies offer nonstandard policies.

Remember, losing your auto insurance through non-renewal can be unsettling, but it's important to act promptly to find a new policy and maintain continuous coverage. Driving uninsured, even for a short time, can have serious consequences.

Cancellation: Be prepared to pay more for a new policy

Cancellation is more problematic than non-renewal because it happens as a result of your behaviour. Insurers often cancel the policies of customers who misrepresent themselves on their applications, receive license suspensions or revocations, are convicted of DUIs, have numerous accidents and/or moving violations, or don't pay their premiums.

Insurers must provide notice of cancellation, and they will refund any unused premium. If you receive a cancellation notice, you'll probably have trouble finding coverage from other standard insurance carriers and will have to pay more for coverage through the "nonstandard" insurance market. Depending on the reason for your cancellation, your nonstandard premium might be 10% to 50% higher than your standard premium.

If you receive a cancellation notice, deal with it immediately to avoid becoming uninsured, even for a short time. If you think your cancellation is unfair, call your agent or insurance company and ask for details. You also have the right to complain to your state insurance department if you think your insurer is treating you unfairly.

If you can't resolve a cancellation, you'll have to turn to the nonstandard market. This includes folks cancelled because of application misrepresentation and payment or driving history, as well as very young and very elderly drivers, those with bad credit or lapsed coverage, immigrants with no U.S. driving history, and owners of "exotic" vehicles.

Drivers who don't qualify for even a nonstandard policy can apply to their state's "last resort" insurance plan.

Misrepresentation on applications

Misrepresentation on an auto insurance application can lead to severe consequences, including denied claims, policy cancellation, and even criminal charges for insurance fraud. Providing false or inaccurate information, either deliberately or inadvertently, can influence an insurance company's decision-making process and hinder their ability to assess risk accurately.

Auto fraudsters may misrepresent their residence, where the vehicle is garaged, the true owner, and the true identity of the principal operator. For example, a driver with a DUI conviction and a suspended license may have their vehicle insured in their partner's name and claim that they are the primary operator of the vehicle. This type of misrepresentation is often discovered during investigations by special investigations unit (SIU) insurance professionals, who utilise examination under oath as a fraud-fighting tool.

Another common example of auto insurance misrepresentation is omitting accidents, speeding tickets, or DUIs to make it appear that the applicant has a clean driving record. Additionally, drivers may misrepresent personal details such as age, marital status, or location to obtain lower rates. These misrepresentations can lead to higher monthly insurance premiums, expensive fines, or even loss of insurance coverage.

Accidental misrepresentation also occurs, such as forgetting the number of years one has had an insurance policy or small details about one's vehicle. While insurance companies typically understand these as honest mistakes, it is essential to gather accurate information before applying for insurance to prevent any confusion.

To summarise, misrepresentation on auto insurance applications can range from small omissions to applying under a false identity. These misrepresentations can have significant consequences, including denied claims, policy cancellation, and legal repercussions. Therefore, it is crucial to provide accurate and honest information to avoid potential problems and ensure a smooth insurance process.

DUI convictions

A DUI conviction can have serious implications for your auto insurance. Driving under the influence of alcohol or drugs is considered one of the most serious indicators of risky driving habits by insurance companies. As a result, you can expect car insurance rates to increase significantly, or even be dropped by your insurer altogether.

Insurance companies assess a customer's risk of filing a claim when setting rates. A DUI conviction is a major red flag and is considered a serious driving violation. This will result in higher insurance rates, with some companies refusing to provide coverage. Your existing insurer may also choose not to renew your policy.

The increase in insurance rates varies by state and insurer, but on average, a single DUI conviction can raise rates by 95%. In California, a DUI can cause insurance rates to increase by up to 148%.

There is no official policy called "DUI insurance". The term is used to refer to the process of shopping for auto insurance after a DUI conviction. Many companies will not insure drivers with a DUI, so the phrase is used to highlight this issue when looking for new insurance.

What to do if your insurance is cancelled due to a DUI

If your auto insurance is cancelled or not renewed due to a DUI conviction, you may need to turn to the nonstandard insurance market. This market caters to high-risk drivers and offers more expensive coverage. You can also apply to your state's "last resort" insurance plan to ensure you remain insured.

A DUI conviction can affect your insurance rates for a significant period. In most states, insurance carriers will start to reduce rates within three to five years of the conviction. In some cases, it can take up to seven years or more for insurers to disregard past DUIs when calculating premiums.

Additional considerations

In most states, drivers with a DUI may be required to file an SR-22 form, certifying that they have auto liability insurance that meets the state's minimum coverage limits. This is typically required for three years.

Additionally, while a DUI conviction may be removed from your criminal record, it will remain on your driving record. In California, for example, a DUI stays on your DMV record for a "lookback period" of 10 years.

How to find cheaper insurance with a DUI

Finding affordable insurance after a DUI can be challenging, but some strategies can help:

• Maintain a clean driving record after your DUI.
• Bundle your auto insurance with home or renters insurance for a discount.
• Increase your deductible on collision and comprehensive coverage to lower your monthly payments.
• Shop around and compare rates from different carriers, including those specialising in high-risk drivers.

Non-payment of premiums

When you miss a car insurance payment, your insurer may let it slide if it's your first time, especially if you are not very late. However, it is always best to contact your insurer and make the payment as soon as possible. If you are within the grace period, you may only have to pay a late fee.

Grace Period

Most auto insurance companies offer a grace period, which is typically between 10 to 30 days. This gives you extra time to make your payment without facing severe consequences. If you miss the payment beyond the grace period, your policy will likely be cancelled, and this cancellation could be retroactive to the date your payment was originally due.

Policy Cancellation

If you miss a certain number of payments or fall too far behind, your auto insurance policy will be cancelled. You will receive a notification of the cancellation, which will include details such as the outstanding balance, late fees, and the date by which payment must be made to avoid cancellation. It is important to note that driving without valid insurance is illegal in almost every state.

Reinstating Your Policy

In some cases, you may be able to reinstate your policy after it has been cancelled. Contact your insurance provider immediately and ask if your policy can be reinstated. The carrier's decision will depend on various factors, including your reason for missing the payment, your history with the company, and the number of past policy lapses. You will need to pay any outstanding premiums and fees, and you may also be required to sign a no-loss statement, attesting that you had no claims during the lapse.

Consequences of Policy Cancellation

Policy cancellation due to non-payment can lead to several negative consequences:

• Difficulty obtaining insurance: A lapse in coverage may cause other insurers to view you as a high-risk driver, making it more challenging to obtain a new policy. You may have to turn to companies that insure high-risk drivers and pay higher rates.
• Increased rates: If you are able to purchase a new policy, your rate is likely to be much higher than before due to the lapse in coverage.
• Fines and license/registration suspension: Driving without insurance can result in fines and suspension of your driver's license and registration.
• Lienholder penalties: If your vehicle is financed, your lienholder may charge penalties or even repossess your vehicle if you fail to maintain insurance.
• Credit score impact: Unpaid bills can affect your credit score, making it difficult to secure loans or obtain favourable interest rates in the future.

Frequently asked questions