Jane Dotson
Auto insurance companies can cancel or choose not to renew a policy for a variety of reasons. While it is rare for a company to drop a customer after a single claim, multiple claims or accidents within a three-year window may result in non-renewal. Other reasons for non-renewal or cancellation include DUI convictions, loss of driving privileges, late or missed payments, and insurance fraud. Customers may also be dropped for failing to disclose relevant information or violating the terms and conditions of the policy. In most cases, insurance companies are required to provide notice before cancelling or choosing not to renew a policy, giving customers time to find a new provider.
| Characteristics | Values |
|---|---|
| Within the first 60 days of a new policy | The insurance company may cancel for almost any reason. |
| After the first 60 days of a new policy | The insurance company may cancel for reasons including non-payment of premium, misrepresentation or fraud, violation of the terms or conditions of the policy, failure to disclose motor vehicle accidents and moving traffic violations, false or fraudulent claims, driver's license suspension or revocation, and unsafe driving with frequent insurance claims. |
| Non-renewal | The insurance company will see out the rest of your policy term but not renew it afterwards. Reasons for non-renewal include multiple accidents, too many insurance claims, drunk driving, and discontinuation of coverage in the customer's area. |
| Cancellation | The insurance company ends the policy before the expiration date. Reasons for cancellation include non-payment of premium, fraud or misrepresentation, license suspension, DUI, and insurance fraud. |
What You'll Learn
DUI/DWI convictions
A DUI or DWI conviction can have serious consequences for your auto insurance policy. Firstly, it is important to note that insurance companies consider individuals with a DUI or DWI conviction as high-risk drivers. This means that you may face significantly higher insurance premiums as a result of your conviction. The increase in insurance rates can be substantial, ranging from an average of 28% to 148%, depending on the company and state. For example, in North Carolina, a DUI more than triples insurance rates, while in Pennsylvania, a DUI results in a 45% increase.
In addition to higher insurance rates, a DUI or DWI conviction can also lead to your auto insurance policy being dropped or not renewed. Insurance companies have the legal right to cancel or choose not to renew your policy if they deem you as a high-risk driver. This is because insurers believe that individuals with a DUI or DWI conviction are more likely to file claims in the future, making them a liability. If your insurance provider decides to drop you, they must provide notice and reasoning for the cancellation.
The impact of a DUI or DWI conviction on your insurance can vary depending on several factors. These include the number of convictions, the time since the conviction, your age, and your state of residence. Generally, the more convictions you have, the more severe the penalties and the higher your insurance rates will be. The length of time since your conviction also plays a factor, with insurance companies typically considering the past three to five years of your driving history when calculating your insurance quote.
Furthermore, the length of time a DUI or DWI conviction stays on your record can range from five to ten years, or even longer in some cases. In California, for instance, a DUI conviction remains on your record for ten years, and you are ineligible for a good driver discount during this period.
To maintain auto insurance coverage after a DUI or DWI conviction, you may need to obtain SR-22 or FR-44 insurance. This type of insurance serves as proof of financial responsibility and demonstrates that you can bear the financial burden of any accidents you may cause. However, not all states require SR-22 or FR-44 insurance, and the length of time you need to keep it on file varies by state.
In summary, a DUI or DWI conviction can result in higher insurance rates, policy cancellation, or non-renewal. It is important to be honest with your insurance company and shop around for the best rates following a conviction. Additionally, the impact of a conviction can vary depending on several factors, and the length of time it stays on your record can be significant.
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Loss of driving privileges
One of the main reasons why an insurance company might drop you is if you can no longer legally drive. This could be due to a suspended driver's license, which can be the result of a DUI, a major driving infraction, or a health issue that affects your ability to drive safely.
A DUI (driving under the influence) or DWI (driving while intoxicated) conviction is a common reason for an insurance company to cancel a policy. From the insurer's perspective, someone with a DUI on their record is a higher risk, and they may decide to cancel the policy rather than charge higher premiums. Similarly, reckless driving, which involves a blatant disregard for safety, can also lead to license suspension and, consequently, auto insurance policy cancellation.
Health issues that affect your ability to drive safely can also result in losing your driving privileges. This could include conditions that impair your vision, physical abilities, or cognitive functions necessary for driving.
In addition to driving-related issues, there are also financial reasons that could lead to license suspension and, subsequently, auto insurance policy cancellation. For example, failure to pay traffic tickets, student loans, or financial obligations from an accident can result in license suspension in certain states.
It's important to note that insurance companies typically provide notice before canceling your policy, and there may be opportunities to appeal or find alternative coverage options.
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Filing excessive claims
The threshold for what constitutes "excessive" claims varies. Most experts say that filing more than one claim per year could lead to policy cancellation, but there is no set limit, and it depends on the insurance company. Some insurers may only look back at your claims history over a three-year period, while others may go back further. Many carriers consider the frequency of claims over their severity, and some may only consider claims that meet a minimum dollar threshold when determining eligibility and rates.
If your auto insurance policy has been dropped due to excessive claims, you may need to turn to a non-standard or high-risk insurance company. These companies are specifically designed for drivers with high-risk factors and may be more willing to insure you despite your claims history. However, they may not offer the same level of coverage as a standard insurer, so it's important to read the fine print before purchasing a policy.
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Non-payment of premiums
Having a lapse in insurance coverage can cost you in various ways, and it might even be harder to obtain coverage in the future. Here are some of the biggest penalties you might face for missing a car insurance payment:
Policy cancellation
As mentioned, your auto insurer will eventually cancel your policy when you have missed a certain number of payments or fall too far behind.
Failure to renew your policy
Not only will the insurance company cancel your policy, but they might not allow you to purchase another policy from them.
Increased rates
When you purchase a new policy, your rate might be much higher than it was before due to having a lapse in coverage.
Fines from the Department of Motor Vehicles (DMV)
Car insurance is required to drive legally in almost every state, so it is possible that you could receive a fine from the DMV for having a lapse in coverage.
License/registration suspension
If you get caught driving without valid insurance, it is highly likely that your driver's license and registration will be suspended until you can show updated proof of coverage.
Fines from your lienholder
If your vehicle is financed and your car insurance lapses, your lienholder could charge you penalties for not maintaining auto insurance. Lienholders may even take out insurance on your behalf, called force-placed coverage, and add the premium amount to your loan payment.
Impacted credit score
Unpaid bills can end up affecting your credit score.
Most insurers offer a grace period of 10 to 25 days for you to reinstate your policy without a lapse in coverage. You have to pay the balance you owe, plus a reinstatement fee. If you can't afford your current auto insurance, you should consider shopping around for a new insurer and asking about discounts.
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Insurance fraud
Some common types of car insurance fraud include:
- Counterfeit airbags
- Staged accidents
- Premium diversion, where an agent steals your premiums and doesn't set up your coverage
- "Sliding", where an unethical agent adds extra coverage that you didn't ask for, increasing your premiums and their commission
- Windshield replacement rip-offs, where unscrupulous glass replacement contractors trick customers into unnecessary replacements
- Tow truck scams, where a "bandit" tow truck takes your vehicle and demands payment for its release
- Car insurance premium evasion, where policyholders deliberately provide false information to obtain insurance at a lower premium
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Frequently asked questions
Insurance companies can cancel policies within the first 60 days without providing a specific reason. However, some states require insurers to provide a reason for cancellation during this period. Reasons for cancellation can include failure to pay the premium, obtaining the policy through fraud, violating the terms and conditions of the policy, or failing to disclose your driving record.
After the initial 60-day period, insurance companies can only cancel your policy for specific reasons, which vary by state. Common reasons for cancellation include non-payment of premiums, DUI convictions, loss of driving privileges, filing excessive claims, and insurance fraud.
If your auto insurance policy is dropped, you should first understand the reason for the cancellation and how long you have to find replacement coverage. Contact your insurance provider to see if they are willing to reinstate your coverage. If not, you may need to look for a new insurance provider or consider a non-standard car insurance company that specialises in high-risk drivers.
Yes, you can challenge a car insurance policy cancellation by contacting your insurance company to discuss whether they are willing to keep your policy. If this is unsuccessful, you can contact your state insurance department to file a complaint if you believe your policy has been cancelled unfairly.
