Auto Insurance Companies: When They Can Drop Your Coverage

Auto insurance companies rarely drop customers after a single claim or accident, but they can cancel or opt not to renew coverage if you're a high-risk driver. This could be due to a pattern of causing accidents, filing excessive claims, or not paying your premium on time. Other reasons for policy cancellation or non-renewal include DUI or DWI convictions, loss of driving privileges, and fraudulent claims.

DUI/DWI convictions

A DUI or DWI conviction can have serious consequences for your auto insurance. Firstly, it is important to note that a DUI conviction will result in you being considered a high-risk driver by insurance companies. This will likely lead to an increase in your insurance premiums. The increase in insurance costs can be significant, with estimates ranging from an average of 80% to 90% or even doubling of insurance rates. Progressive and USAA are two insurance companies that offer relatively cheaper rates for drivers with a DUI conviction.

In addition to higher insurance rates, a DUI conviction may also result in your insurance company dropping you as a customer. Not all insurers provide high-risk coverage, and some may choose to cancel your policy. It is important to note that insurance companies typically check your driving record during policy renewal and will find any new convictions at that time. Therefore, it is advisable to inform your insurance carrier about your DUI conviction as soon as possible to avoid potential policy cancellation during renewal.

Furthermore, a DUI conviction may require you to file an SR-22 or FR-44 form, depending on your state. These forms prove that you have the minimum insurance coverage required by your state and that your insurance limits are high enough to meet state requirements. Failure to file these forms, if required, could result in further consequences, such as suspension of your driver's license.

The length of time that a DUI conviction will affect your insurance rates varies by state and insurance company. On average, a DUI will impact your insurance rates for around three years. However, in some states, a DUI may remain on your record for up to five years or even longer, and it could affect your rates for a similar duration.

Non-payment of premiums

If you miss a car insurance payment, take a deep breath; there's likely a way to fix it. Here's what you can do:

• First missed payment: If this is your first time missing a payment, your insurance company might cut you some slack, especially if you're only a few days overdue. Pay your premium promptly and reach out to your insurer as soon as you notice the missed payment. A quick call to explain the situation can sometimes prevent any further issues.
• Missed payment beyond a few days: If more time has passed, act quickly. Contact your insurance provider right away to discuss your options. If your policy doesn't include a grace period, or if you've missed it, your coverage could be at risk.
• Multiple missed payments: If you have missed payments before, your carrier might not be as lenient. You should still contact your carrier right away. If you're missing payments because you can't afford to pay your premium, it might be time to shop around and see if you can find more affordable coverage elsewhere.

To avoid missing car insurance payments in the future, you can:

• Enroll in autopay: This is the easiest way to ensure you never miss a payment. However, if you get a new bank or credit card, make sure to update the details for any bills on autopay.
• Set reminders: Set reminders on your phone or calendar to alert you when your bill is due. Consider setting multiple reminders in the days leading up to your payment date so you don't forget.

If you know ahead of time that you won't be able to pay your next month's car insurance premium, contact your auto insurer as soon as possible. You might be able to request a different payment deadline or defer that month's payment.

Filing excessive claims

Filing excessive auto insurance claims can lead to your insurance provider dropping you as a client. While it is rare for an insurance company to drop you after a single claim, filing multiple claims can increase the likelihood of this happening.

Most insurance companies will drop you as a client after three claims over a three-year period, regardless of the type of claim. However, it is important to note that there is no limit on the number of claims you can file. The impact of multiple claims on your auto insurance is primarily increased rates. An at-fault collision claim, for example, raises insurance rates by an average of $64 per month, or $384 per six-month policy period.

If you have a history of excessive claims, insurance companies may view you as a high-risk client and decide to drop your coverage. This is because too many claims indicate high-risk behaviour, which can make it challenging for you to find affordable car insurance from a new insurer.

To avoid being dropped by your insurance company, it is advisable to practice safe driving habits, be selective with your insurance coverage, and pay your premiums on time and in full.

Loss of driving privileges

An auto insurance company may cancel your policy if you can no longer drive legally. This could be due to a suspended, revoked, or cancelled driver's license. A license suspension may result from a DUI or other major driving infractions, or from a health issue that affects your ability to drive safely.

DUI laws and penalties vary by state, but you can generally expect to have your driver's license suspended if convicted. The length of a license suspension may depend on several factors, including:

• Blood alcohol content (BAC)
• Age
• Whether an accident involving injury or death was involved
• Whether you are a repeat offender

Many states have stricter DUI rules for drivers under 21, often referred to as Zero Tolerance laws. This means even a hint of alcohol on a driver's breath could lead to an automatic conviction and subsequent license suspension.

In addition to a DUI, there are other specific traffic ticket violations that can result in a suspended license, including:

• Leaving the scene of an accident that resulted in injury, death, or property damage
• Reckless endangerment in a road construction zone
• Eluding a police officer
• Driving without car insurance
• Committing a felony involving a motor vehicle
• Vehicular assault, homicide, or manslaughter
• Unattended child in a running vehicle

States that employ a point system will suspend and/or revoke driver's licenses once a certain number of points are accumulated. The exact point totals assigned to each traffic violation vary by state, as does the license suspension point amount. For example, North Carolina will suspend a driver's license if 12 points are accumulated within a three-year period, while California drivers could face license suspension with four points in 12 months or six points within 24 months.

Aside from traffic violations, non-driving violations may also result in the loss of driving privileges. Many states will pull a driver's license for violations unrelated to driving, such as failing to pay child support or stealing motor fuel.

Fraudulent claims

Insurance fraud is a serious issue that covers a wide range of infractions, from "hard" to "soft" fraud. Committing insurance fraud can result in your auto insurance company dropping you.

Hard fraud typically involves large-scale, intentional deception, such as faking an accident to receive a claims payout, filing multiple claims for a single incident, or falsely reporting a vehicle stolen. On the other hand, soft fraud refers to smaller acts of deception, like lying by omission on insurance applications, misrepresenting the source of damage, or exaggerating damages to obtain larger payouts.

Insurance companies have a zero-tolerance policy when it comes to insurance fraud and will likely cancel the policy of anyone caught committing either hard or soft fraud. This is because fraud directly impacts the insurer's ability to assess risk accurately and provide coverage.

If you are found to have committed insurance fraud, your insurance company is likely to cancel your policy immediately, regardless of how long you have been a customer. This is because fraud is a serious breach of trust and can have significant financial implications for the insurer.

In addition to policy cancellation, there may be other consequences for committing insurance fraud. Depending on the severity of the fraud and the jurisdiction, you could face legal penalties, including fines or even jail time. Insurance fraud is a criminal offence and is taken very seriously by law enforcement and the insurance industry.

To avoid being dropped by your insurance company, it is important to be honest and transparent when providing information or filing claims. This helps maintain the accuracy of risk assessment and ensures that you are properly covered in the event of an incident.

Frequently asked questions