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How To Lose Your Car Insurance - Late Payments, Fraud, & More

Article 8 of 10 in Buying Car Insurance - What to Know Before You Buy

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If you have received an auto insurance cancellation letter or non-renewal notice, your insurance company is notifying you that they will not be renewing your auto insurance policy on its scheduled renewal date. Non-Renewal is the insurance company's way of canceling your auto insurance. Here are some of the reasons for auto insurance cancellation:

  • Too many tickets, accidents, or violation in a given period.
  • A driver in your household who is not listed on your policy
  • Company finds a material misrepresentation on your application that was provided to get auto insurance coverage.
  • Company has decided not to provide coverage to your county or state.
  • Suspension or revocation of your driver's licenses

KEEP IN MIND: Whatever the reason for your insurance being canceled, you will be without auto insurance unless you secure another auto insurance policy by your non-renewal date.

Car Insurance Grace Period

Individual state law govern what process a company must follow if they want to cancel/non-renew your coverage and whether a reason for the cancellation or non-renewal must be given to the policy holder. In the event of a cancellation or non-renewal, the company must mail a notice to the policyholder. States vary on the advance notice required, which can range from 10 to 45 days. If you acquire coverage from another insurance company during this time, your policy with the first company needs to be cancelled. In some cases, your new company will offer to send the cancellation notice for you. If you cancel your policy before your cancellation date, you are entitled to a refund of the unused portion of your premium.

KEEP IN MIND: When you sent your cancellation notice, note where you would like for your refund to be mailed if it is different from your policy address.

Car Insurance Late Payment

The most common reason for auto insurance cancellation is non payment of premium. If you miss a payment the company will generally give you a time to come up with the current shortfall, or allow you to reinstate your coverage. However, the truth is, unlike homeowners policies which generally allow for a 30 day grace period to make premium payments, most insurers can cancel auto policies immediately for a late car insurance payment if allowed by state law. Check the law in your state to see what grace periods are allowed. The National Association of Insurance Commissioner's (NAIC) website provides links to state insurance departments. Look under consumer information to see whether your state provides a grace period.

Most insurers won't cancel your policy for non-payment if it is a one-time occurrence because they want your business, however if you are chronically late, your insurer may take this opportunity to cancel your policy.

TIP: Do not give your insurance company further reason to cancel your insurance policy. An insurance company will not hesitate to cancel a policy due to a late car insurance payment if you've become a high risk due to speeding tickets, numerous accidents or other violations.

Cancellation of Auto Insurance and Bad Credit

Being cancelled for non-payment of premiums may also earn you a bad credit score and cost you more on future policies with other insurers. Most insurers use credit scores to assess their risk. The lower your credit score, the more you will pay for insurance. If you don't have the money to pay your premium, contact your insurer immediately and see if you can work out a payment schedule. A bad credit score will follow you from insurer to insurer and could leave you without insurance altogether!

TIP: Many insurers allow for online payments that can be automatically deducted from your checking and savings accounts. If you are a chronic late payer, take advantage of these new resources to avoid cancellation of non payment and bad credit.

What to do if you cannot find auto insurance

If you receive an auto insurance cancellation letter, start looking for replacement insurance right away. For those individuals that cannot find replacement insurance, States require that a handful of companies provide an assigned risk policy. All States have some form of Assigned Risk Coverage. These policies are usually no different in coverage and they must at least provide the minimum liability limits set by that state. It can be pricey as an assigned risk policy can double the cost of an average auto policy, however, it will give you the needed auto insurance coverage required.

TIP: If you think you need assigned risk coverage, call several carriers and let them know up front about your driving record so they can let you know if they are able to provide you with a high risk policy that will meet your needs. Some carriers may not be able to provide you with coverage, but can refer you to another company that can. Also, check with an insurance agent or ask your state insurance department about how to get assigned risk coverage.

For more information or to get a quote for auto insurance from several reputable carriers, click here to visit the Free Advice quote center!

For more information about getting the right car insurance policy to fit your needs, check out the following articles:

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