Are providers allowed to cancel your car insurance?
Your car insurance can’t be cancelled by your provider without cause. In most states, companies must give written notice of at least 30 days before canceling a policy. Your policy is a formal contract that states the reasons the insurer could cancel the policy and how that would happen.
There are two reasons a car insurance provider would drop a customer.
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- Refusing to renew a policy. This can be done at the insurer’s sole discretion, in line with any guarantees or policy terms it has written up about renewals. If it has promised “guaranteed renewal,” then there might be some stricter rules around it, but this will generally not be the case.
- Cancelling the policy of an existing customer. An insurer can’t just cancel a policy whenever it wants. There are only a few situations where an insurer is allowed to do that.
When is an insurer allowed to drop you?
Insurers can generally refuse a renewal as desired, but can’t simply drop customers that easily. An insurance policy is a contract, and the insurance company can’t bail out of it unless the contract has been violated.
There are two main ways this might happen:
- Unpaid premiums. If your premiums go unpaid for a while, an insurer has the right to eventually cancel your policy. The exact lengths of time can be found in your policy.
- Dishonesty or violation of terms. If you are found to have lied on your application to geta lower premiums, made a false claim, committed insurance fraud, entered into the policy dishonestly (such as with a fake identity) or otherwise gone thoroughly against the terms and spirit of the contract, the insurer may cancel your policy.
Generally, as long as the premiums are all paid up, a customer has to step pretty far out of line to be dropped by a car insurance provider.
How much notice do insurers have to give you?
Car insurers must give you notice if your renewal is being declined or your policy cancelled.
This must be in the form of a written notification, typically at least 30 days ahead of cancellation.
Do insurers have to give a valid reason for cancelling a policy or denying renewal?
Insurers are not generally required to provide this information unprompted, but often will.
If you ask for a reason, insurers are usually required to provide it. Similarly, insurers are typically obligated to provide details of their dispute resolution process if requested.
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Why might a renewal be declined?
There are many reasons a renewal might be declined. Typically, it’s some variation on you being a statistically riskier driver than you were when you took out the policy.
This will often manifest as higher premiums first, but eventually an insurer might simply consider the risk unreasonable.
A suddenly declined renewal could be any or any combination of risk factors an insurer considers, including:
- Entering a new age bracket
- Getting speeding tickets
- DUI
- Having too many at-fault accidents
- Making too many claims
- Missing too many premium payments
- Adding modifications that affect car performance, or significantly affect its value
How to avoid being dropped by an insurer
The best way to avoid having a policy cancelled is to not commit insurance fraud, to be honest on your applications and claims and to keep up with premium payments.
Making sure your renewal is accepted can be more difficult. Where possible, try to:
- Only making claims when you need to
- Drive carefully
- Follow the road rules
- Drive a sensible car
- Keep up with premium payments
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Bottom line
Your car insurance policy does offer some protection against sudden cancellation by your provider. As long as you avoid dangerous driving and pay your premiums on time, you shouldn’t worry about your car insurance policy being cancelled.
While it can be concerning to think your car insurance policy could be cancelled after one major driving mistake, you’re not without options if it does happen. Compare your options to find the right provider you can trust.
