Car insurance is legally required in most states, but insurance providers are allowed to cancel your insurance coverage or decline contract renewal in a variety of circumstances and for a plethora of reasons. If your policy is unexpectedly terminated by your insurer, it must be done in one of two methods: cancellation or non-renewal. Here’s what you need to know about the differences between these two outcomes.
Auto insurance cancellation
After maintaining your policy for 60 to 90 days, your insurance provider retains the right to cancel your service if you violate the terms and conditions of the contractual agreement both parties signed at the start of the sale. Here are the three most common ways insured parties violate their contract and get their insurance canceled:
Fraud: If you lied about anything on your application, such as your past driving history or number of vehicles, your insurer reserves the right to cancel your policy.
License suspension: Regardless of the reason, having your license revoked or suspended is a major red flag to any insurance company and shows that you are a high-risk customer. If your license is suspended as a result of a major moving violation, such as a DUI/DWI, your insurer may cancel your existing policy.
Non-payment: While a few sporadic late payments can be forgiven, insurers that face recurring payment issues and repeatedly ignore late-payment warnings may decide to cut bait and cancel the policy.
Once your insurance is canceled, you will be forced to quickly find another insurance provider to avoid a lapse in coverage. If you were kicked off your plan by a major insurance company, it will be more difficult to find another insurance provider, as they all utilize similar parameters to determine client eligibility.
Additionally, your premium and monthly payments will increase as a result of your canceled plan, so you should expect to pay more out-of-pocket for a similar level of coverage you received previously.
Auto insurance non-renewal
When your insurance policy expires, both you and your insurer retain the right to decline the renewal of your existing policy. If this occurs, your insurance must give you an appropriate amount of notice, the specific amount of which is detailed explicitly in your contract, which will provide you with enough time to find a new insurer without facing a lapse in coverage.
Providers can decline to renew an existing policy for a multitude of reasons unrelated to your actions as a customer, such as your specific plan being discontinued. But there are a few instances when it can be based on your actions, such as repeated late payments or an increased risk of harmful accidents.
While an insurance policy non-renewal is not as severe as a cancellation and doesn’t always lead to a higher premium or monthly bill, it is important that you stay up-to-date with your insurance provider to make sure you are behaving as a model customer and making the most of your plan.
Next steps after a cancellation or non-renewal
Regardless of why your policy has been terminated, your insurance provider is required to give you the reasoning behind their decision. If they did not already tell you over the phone or via mail, contact your insurance company to find out why your policy ended and, if applicable, negotiate your way out of the situation. If your insurance provider holds fast to their decision, you should immediately begin searching for insurance quotes, plans, and providers to ensure you avoid having a lapse in insurance coverage.