Can a car insurance company drop you?

Your car insurance can’t be canceled by your provider without cause. In most states, companies must give written notice of at least 30 days before canceling a policy. However, your insurer can refuse to renew your policy at the end of your current policy term.

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 can include:

• Inaccurate information. False or inaccurate information on your application could cause your provider to cancel your policy.
• Missing premium payments. 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’re at fault for too many accidents. That increased risk could eventually lead to it dropping 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. This also includes getting your license suspended or revoked.
• Improper use. Your car insurance company could drop you if your vehicle is insured for personal use but actually used for commercial purposes. This is because 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.

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

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 cancellation.

You may also encounter 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 canceling 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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How much notice do insurers have to give you?

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 30 days ahead of 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.
• 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 canceling it outright.

Do insurers have to give a valid reason for canceling 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.

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 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.

Why would my policy renewal be declined?

Several factors can lead to a renewal being 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 show up as higher premiums first. But eventually an insurer might simply consider the risk unreasonable.

A declined renewal could be any or any combination of risk factors an insurer considers, including:

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

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 is canceled. 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.

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5 steps to get insurance if you don’t have a lot of insurance options

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. 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.
2. Find out if you’re considered high risk. Depending on the reason for cancellation, 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. Shop around for other high risk providers who are more willing to accept any driver.
3. Look for group pool insurance. If you still can’t get a quote, you may have options from state-supported insurance pools like WAAIP. Since car insurance is legally required, your state must provide a reasonable option for you, so you can try your luck in the high-risk pool. You won’t be refused as a customer since risk is shared among all individuals with these plans.
4. 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.
5. Work on reducing your risk. Consider taking a driver training course or building your credit score.

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.