Dropped By Your Auto Insurer: What You Need To Know

Auto insurance companies can drop you for a variety of reasons, from having too many accidents or claims to criminal violations such as a DUI conviction or insurance fraud. This can happen in two ways: policy cancellation and policy non-renewal. A policy cancellation occurs when an auto insurance company terminates the policy before it has expired, while a policy non-renewal means that the insurance company will see out the rest of your policy term but let you go as a customer after that. In both cases, insurance companies are required to notify you in advance, although the specific notification requirements vary according to state law.

Reasons for insurers dropping you

There are several reasons why an auto insurer might drop you. Here are some common reasons:

Non-payment of Premiums

If you fail to pay your insurance premiums, your insurer may cancel your policy. Most insurance companies offer a grace period of 30 days to make a payment, but if late or missed payments become a pattern, your policy may be cancelled.

Frequent or Excessive Claims

Filing multiple insurance claims within a short period can lead to your insurer cancelling your policy or choosing not to renew it. Homeowners or drivers with a lengthy claim record are generally considered riskier to insure.

Insurance Fraud

Insurance fraud is illegal and can result in serious consequences. If you are found to have committed insurance fraud, such as lying on your policy application or filing a fraudulent claim, your insurer may immediately drop you as a policyholder.

Underwriting Issues

Underwriting issues can also lead to a cancelled policy. For example, if an adjuster visits your home after a claim and notices that your home does not meet the insurer's underwriting guidelines, your policy may be cancelled.

High-Risk Areas

If you live in an area with a high risk of severe weather or natural disasters, your insurer may choose not to renew your policy. This is because the risk of paying out for damage claims is higher in these areas.

DUI or DWI Convictions

If you have been convicted of driving under the influence (DWI) or driving while intoxicated (DUI), your insurer may view you as a high-risk driver and cancel your policy. DUI or DWI convictions can also result in the loss of your driving privileges, making it difficult to obtain car insurance.

The difference between cancellation and non-renewal

Cancellation and non-renewal are two different ways your car insurance policy can end. Here are the key differences between the two:

Timing

Cancellations can occur during the term of the policy or when the policy term is ending. Non-renewal, on the other hand, happens at the end of the coverage period, when the policy expires. Cancellations take place mid-term, while non-renewal occurs at the policy's expiration date.

Reasons

Insurance companies typically cannot cancel a policy that has been in force for 60 days or more, except for specific reasons such as non-payment of premiums, fraud or misrepresentation on your application, or suspension or revocation of your driver's license. Cancellations may also occur if you are convicted of a DUI or have too many moving violations or at-fault accidents. Non-renewal can happen through no fault of your own. For example, your insurer may decide to reduce its number of customers in your area or discontinue the particular type of insurance you have. Non-renewal can also be due to your actions, such as raising the insurance company's risk by driving drunk.

Notice

Insurance companies are legally required to notify you within a state-mandated time period before cancelling or non-renewing your policy. The exact timeframe and rules will depend on the state in which you live. For example, in New York, insurance companies must provide at least a 45- to 60-day notice before the expiration date for non-renewal, while cancellation requires a 20-day notice or 15 days in the case of non-payment of premiums.

Impact

Cancellation is generally considered more serious than non-renewal and may make finding a new car insurance policy more difficult and expensive. After a cancellation, you will likely pay more for car insurance and may face problems when trying to buy a policy from another company. Non-renewal, on the other hand, does not directly affect car insurance rates or your ability to find another policy.

What to do if your insurer drops you

If your auto insurer decides not to renew your policy, you may want to contact them to find out why. You may be able to come to some sort of agreement with them to maintain coverage. If not, you’ll need to start shopping around for new car insurance.

Once you receive a letter of non-renewal, it’s a good idea to reach out to your provider. They can offer more details on why you were dropped if it isn’t clear in the notice. You can also try to work out a deal to stay with them. There’s always a slight possibility that your non-renewal was sent by error, so reaching out to your carrier can potentially clear this up.

Non-renewal letters sometimes may also contain phone numbers of referred companies you could use instead, or they may contain information about an insurer of last resort or a government resource that can help you find coverage in your area.

But, if you find out your car insurance is definitively not being continued, it’s time to start shopping around. Comparing quotes from several different providers is the best way to find coverage at a good rate.

It’s important to begin shopping for insurance before your current coverage lapses. You can’t drive in any state (except New Hampshire or Virginia) without car insurance. It’s illegal to do so. And, letting your car insurance lapse is a huge red flag for insurance carriers. Having a lapse in coverage immediately marks you as high-risk, and you’ll very likely pay higher rates to get a policy after a lapse.

If your insurer has cancelled your policy, you should still be given advance warning to find new insurance coverage, so don’t panic or drive without auto insurance coverage.

How to avoid being dropped

Being dropped by your auto insurance company can be a scary prospect, but there are several things you can do to avoid this outcome. Here are some tips to help you maintain your auto insurance coverage:

• Be honest with your insurance company: Dishonesty on your insurance application, such as lying about your address or driving record, is considered fraud and can lead to cancellation. Being truthful from the start helps build trust and reduces the risk of your insurer dropping you.
• Keep a clean driving record: Drive carefully and follow the rules of the road to avoid accidents, speeding tickets, and other moving violations. A clean driving record indicates lower risk, making it less likely for your insurer to drop you.
• Make timely payments: Ensure that you pay your auto insurance premiums on time. Set up automatic payments or mark due dates on your calendar to avoid late or missed payments, which can be a common reason for insurers to cancel policies.
• Only file necessary claims: If the damage is minor and the repair cost is only slightly more than your deductible, consider paying out of pocket instead of filing a claim. Excessive claims can increase your risk profile, potentially leading to cancellation.
• Communicate with your insurer: If you encounter financial difficulties or anticipate missing a payment, reach out to your insurance company immediately. They may be willing to work with you by offering temporary payment plans or grace periods to help you stay current on your premiums.
• Address high-risk factors: If you are considered a high-risk driver, take steps to improve your standing. This could include completing a driving safety course, maintaining a good credit score, or addressing issues such as DUI convictions or license suspensions that increase your risk profile.

Remember, while it is possible to be dropped by your auto insurer, it is relatively uncommon. By following the tips above and maintaining a good relationship with your insurance company, you can significantly reduce the chances of having your auto insurance coverage cancelled or non-renewed.

How being dropped affects insurance rates

Being dropped by your auto insurance company will likely affect your insurance rates, and the degree of that effect depends on the circumstances of your policy cancellation or non-renewal.

If your insurer drops you because it no longer issues policies in your area, the non-renewal is not a reflection of you as a customer. The premium of the new policy you purchase from a different insurer may differ from the non-renewed policy, but the non-renewal won't have been a factor.

On the other hand, if your insurer cancels or chooses not to renew your policy for a reason that makes you a riskier customer, your rates are likely to go up. For example, if you are at fault in an accident that results in a total loss, your claims history might cause your new insurer to charge you a higher rate.

If your insurance company drops you, it will be harder to find a new policy, and you will probably have to pay a higher rate. If your policy is cancelled, you will need to purchase a new one as soon as possible, as driving without insurance is illegal in most states and can result in the loss of your driver's license, fines, and risk to your financial wellbeing.

Frequently asked questions