Can a car insurance company drop you?

Your car insurance can’t be canceled by your provider without cause, and it can cancel policies in the middle of your term only for specific reasons. In most states, companies must give written notice of at least 20 to 30 days before canceling a policy. Your insurer also can refuse to renew your policy at the end of your current policy term — but it’s required to provide notice about the nonrenewal too.

Is it legal for my insurance company to drop me?

Yes, in most cases, your car insurance provider can legally cancel your policy. But it must abide by state laws, which regulate acceptable reasons for the cancellation and how much notice it must give you.

You may encounter a few exceptions when you can consider getting legal counsel to 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. Examples of wrongful cancellation:

• Insufficient notice. Your provider must give you notice prior to cancellation that meets the timeline required by your state, which is usually 20 to 30 days before your policy is canceled.
• Invalid reason. Outside of the initial 60-day period, your provider must have a valid reason for canceling your policy, such as nonpayment or the policyholder receiving a license suspension.
• Breaking the contract. Check your terms and conditions to find out when your provider can and can’t cancel your policy.

How much notice do insurers have to give before canceling?

Car insurers must give you notice if your renewal is being declined or your policy canceled. This must be in the form of a written notification, typically at least 20 to 30 days ahead of the cancellation.

The severity of the situation can affect when your provider can cancel your policy and how much notice you’ll receive. 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.
• After nonpayment. Insurers often can provide less notice, such as only 10 days, before canceling your policy for not paying your premium. Even if your state allows a short timeline, your policy may have a longer grace period.
• Midpolicy. In more serious situations like unpaid premiums or a change in risk, your provider could drop you in the middle of your policy — as long as it drops you for a reason allowed by state laws.
• 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 canceling it outright.

Do insurers have to give a valid reason for cancellation?

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. Typically, insurers are obligated to provide details of their dispute resolution process if requested.

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What to do if your car insurer drops you

Drivers who are considered high risk might find it difficult to find insurance at a reasonable rate or a company that will insure them at all. You might be considered high risk if you have multiple accidents, tickets, a DUI or other incidents on your driving record.

1. Ask your agent or provider for more details. It never hurts to see if you can stop your policy from being canceled. There may be a misunderstanding that you can correct, such as a late fee that you didn’t pay or inaccurate policy information.
2. Shop around with high-risk providers. Once you’ve received notice that your policy will be canceled, shop around for high-risk providers willing to accept any driver.
3. Look for group pool insurance. If you can’t get a policy from any traditional insurers, you could try state-supported insurance pools like WAAIP as a last resort. Since car insurance is legally required, your state must provide a reasonable option for you. You won’t be refused since the risk is shared among all insurers with these plans.
4. Work on reducing your risk. Consider taking a driver training course or building your credit score.

What should I do if I miss a car insurance payment?

In some cases, you may be able to sort your situation out with your insurance company before your policy lapses. Take the following steps to minimize any fallout from a missed payment:

• Talk to your insurer in advance. If you know you’ll miss a payment, you might be able to delay your payment by a few days.
• See if you have a grace period. Your insurer may give you a few days before it requires payment.
• Get reinsured quickly if you have a lapse. Also contact your insurer to make sure you don’t owe anything on your policy.

Why do insurers cancel policies?

While your insurer can’t drop you without reason or notice, there are a handful of situations that could cause them to cancel your policy. Acceptable reasons for canceling will also vary based on which state you live in.

Check your policy disclosure to view the reasons it could be canceled. Typical reasons include:

What if I disagree with the reason?

If you think that your car insurance company wrongfully dropped you, you either can dispute the cancellation with your insurance company, file a complaint with your state’s insurance department or talk with a lawyer about your case.

If you file a complaint, your state’s insurance department should investigate the complaint to ensure that your situation was handled fairly. If you want to escalate the point, a lawyer can advise you on whether you have legal grounds to sue your insurance company.

Will I get a refund if 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 were for 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.

Say you paid $1,200 up front for a 12-month policy and your policy was canceled after 7 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.

How to avoid being dropped by an insurer

The best way to avoid having a policy canceled is to be honest on your applications and claims, not commit insurance fraud and keep up with premium payments.

Making sure your renewal is accepted can be more difficult. Where possible, try to:

• Only make claims when you need to
• Drive carefully or take a safe driving course
• Follow the road rules
• Drive a sensible car
• Keep up with premium payments
• Improve your credit

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 canceled.

While it can be concerning to think your car insurance policy could be canceled 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.

Common questions about car insurance policy cancellation

• Will I need any special documents to get coverage if my policy is canceled?

  In most cases, no. However, if your license was suspended or you’re considered high-risk, you may need to get SR-22 car insurance.

• Will insurance be more expensive if my policy is canceled?

  Only if the reason for cancellation was a change in your risk level. High-risk drivers often pay higher premiums than other drivers, but it depends on your situation and the provider you choose.

  If you’re considered high risk, insurance from nonstandard providers could be cheaper than a policy from a major provider, but you might not get as much coverage.

• Can I apply to the same provider if my policy is canceled?

  It depends on the provider. It never hurts to apply for coverage with the same provider, but be upfront about your previous cancellation and make sure all of your application details are correct.

  You could also speak with your provider before your policy is canceled to see if you can change your policy instead of canceling it.

• What is nonstandard auto insurance?

  Nonstandard or high-risk auto insurance is a type of coverage that’s designed for drivers with less than perfect driving histories, poor credit or little driving experience.