Can your car insurance company drop you? | finder.com
Can your car insurance company drop you?

Can your car insurance company drop you?

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Notified that your policy is being canceled? Find out how to move forward.

If you’re unhappy with your current coverage, you can easily cancel your car insurance policy at any time. The same is true of your provider. And if, for one reason or another, they do end up canceling your policy, it could leave you with a gap in coverage.

Learn why a car insurance provider could cancel your coverage and what to do if it happens to you.

Why would my car insurance be canceled?

While your insurer can’t drop you without reason, there are a handful of situations that could cause them to cancel your policy.

  • Inaccurate information. False or inaccurate information on your application could cause your provider to cancel your policy.
  • Unpaid premiums. The most common reason why insurance companies drop customers is due to unpaid premiums, so make sure to stay up to date on your bills.
  • Fraudulent claims. Filing fraudulent or false claims is a quick way to get dropped by your insurance provider.
  • Several at-fault accidents. Your insurance provider may consider you a high-risk driver if you are at fault for too many accidents and could eventually drop you.
  • Traffic violations. Your insurance provider could drop you if you rack up a number of traffic tickets, moving violations or points on your driving record.
  • Improper use. Your car insurance company could drop you if your vehicle is insured for personal use but actually used for commercial purposes since there could be a higher risk of damage.
  • Too many claims. While this isn’t the case for every provider, some companies may drop you for filing too many claims in a short time.
  • Severe health issues. Some providers may cancel your coverage if you develop severe health issues that make it dangerous for you to drive.
  • Company shuts down. Your insurance provider could also cancel your coverage if it closes down or leaves your area.

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When can a car insurance company cancel my policy?

The severity of the situation can affect when your provider can cancel your policy and how much notice you’ll receive. Insurance companies are required to give you 30 days’ notice before dropping you so you have time to find other coverage. Here are the timeframes to keep in mind:

  • Within 60 days of a new policy. During the first 60 days of your policy start date, your provider can cancel your policy without reason. In most cases, this happens due to discrepancies or inaccurate information on your application.
  • Midpolicy. In more severe situations — like unpaid premiums or material change in risk — your provider could drop you in the middle of your policy.
  • At the end of your term. In less extreme cases, your provider may wait until your policy end date and prevent you from renewing your policy instead of cancelling it outright.

Will I get a refund after my car insurance is canceled?

If you pay monthly premiums for your car insurance policy, it’s unlikely that you’ll get a refund for past premiums you’ve already paid, since those payments covered past coverage. However, if you opted to pay your premiums in a single lump sum payment for a six- or 12-month policy, you should get money back.

In that case, you should receive a prorated payment, where the overall cost would be broken down into days and any unused days would be refunded. But refund policies can vary, so check with your agent or provider for more information.

Case study

Say you paid $1,200 up front for a 12-month policy and your policy was canceled after seven months. You would then receive payment for the remaining five months of unused coverage, based on the monthly rate of $100. That means you’ll get a $500 refund for the five months you already paid for.

Is it legal for my insurance company to cancel my policy?

Yes, in most cases, your car insurance provider can legally cancel your policy. However, there are a few exceptions where you might want to consider getting legal counsel to find out if you should fight the cancellation.

There’s no guarantee you’ll win, but if you do, you could reinstate your policy or get a payout for wrongful cancellation. Potential examples of this might include:

  • Insufficient notice. Your provider must give you at least 30 days of notice prior to cancellation or it may be invalid.
  • Invalid reason. Outside of the initial 60-day period, your provider must have a valid reason for cancelling your policy.
  • Breaking the terms and conditions. Check your terms and conditions to find out when your provider can and can’t cancel your policy.

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What should I do if my car insurance is canceled?

While it’s never fun to be informed that your policy is going to be canceled, take these steps to get back on track:

  1. Speak with your agent or provider. It never hurts to speak with your agent or provider to see if you can find a way to stop your policy from being canceled. Maybe there was a mistake or miscommunication with your policy or payment.
  2. Find out if you’re considered high-risk. Depending on the reason for cancelation, you may be considered a high-risk driver, which could make it a little harder to get coverage. Ask your provider or agent if this applies to you.
  3. Start shopping for coverage. Once you’ve received notice that your policy is going to be canceled, start looking around for a new policy right away.

How do I get car insurance after a canceled policy?

Shopping for car insurance after a canceled policy isn’t much different than shopping for your first policy. Most providers should cover you, but if you’re considered a high-risk driver, you may need to look for one that specializes in nonstandard coverage.

  • Shop around. Get quotes from multiple providers to compare your options and get the best coverage.
  • Be upfront. During your application, disclose that your previous policy was canceled. While this could make it more difficult to get new coverage, it’s better to be honest to avoid another cancellation.
  • Look for non-standard coverage. If your policy was canceled due to health issues or too many accidents, for example, you might need to look for high-risk car insurance providers.
  • Improve your driving record. If you have multiple moving violations, a license suspension or a number of at-fault accidents, consider a driver training course. You could be eligible for a defensive driving auto insurance discount after completion.
  • Improve your credit score. Before applying for new coverage, build your credit score to improve your chances of getting approved, or consider car insurance for lower credit scores.

Compare car insurance after your policy has been canceled

Name Product Roadside assistance New car protection Available states
Included free
Yes, cars under 2 years old
All 50 states
Enjoy having your own dedicated agent to help you get the best discounts and coverage.
Optional
Yes, cars under 1 year old & 15,000 miles
All 50 states
Car insurance through Liberty Mutual will give coverage options for almost any situation.
Included free
No
AZ, AR, DE, IL, IN, IA, KY, LA, MD, MI, MS, MT, NM, ND, OH, OK, OR, PA, TX, UT
Root offers simple, affordable insurance that’s ideal for good drivers. Try the Root app for 2 weeks and see how much you could save. Available in 20 states.
Included free
Yes, cars under 1 year old & 15,000 miles
All states except AK, DE, HI, MT, NH, VT, WY
Esurance offers a modern online and mobile experience that helps you take your insurance on the go. Available in 42 states.
Optional
Yes, cars under 1 year old & 15,000 miles
AZ, CA, IL, NJ, OR, PA, VA, WA
Drive less than 30 miles a day? Save on the coverage you need with pay-per-mile insurance from Metromile. Get a low monthly rate then pay just a few cents per mile. Available in AZ, CA, IL, NJ, OR, PA, VA and WA.

Compare up to 4 providers

Bottom line

While it’s certainly stressful to have your car insurance policy canceled, you still have options. Speak with your agent or insurance provider to find out exactly why your policy was canceled, then discuss your situation to resolve the issue.

If that isn’t possible, shop around and compare your options from multiple insurance providers or consider high-risk auto insurance.

Find the cheapest rates

Compare the best car insurance companies near you.

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Frequently asked questions

Peter Carleton

Peter Carleton is a writer at finder.com who specializes in credit cards, life insurance, mortgages and more. In his free time, you can find him cooking, writing or honing his skills in WordPress development.

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