Last Updated on December 26, 2021
You buy car insurance to protect you from unexpected events. But can your car insurance company cancel your policy without warning?
In most states, car insurance companies are legally required to notify policyholders 30 days before cancellation. Insurers are allowed to cancel an insurance policy, but they cannot cancel your policy without notice.
Keep reading to discover everything you need to know about car insurance policy cancellations and how they work.
Table of Contents:
- Reasons for Cancellation
- States Allow Insurers to Cancel Policies for Specific Reasons
- Insurers Must Notify Policyholders Before Cancellation
- Contact your State Insurance Department for Unfair Cancellations
- How to Avoid Car Insurance Cancellations
- What to Do After Policy Cancellation
- Cancellations Could Lead to Higher Rates
Reasons for Cancellation
Check your insurance policy’s cancellation section. Most insurance policies have a cancellation section that lists the reasons an insurer could cancel your policy, including the terms they must follow when canceling your policy.
The most common reason for cancellation is a missed payment. If you have missed a payment to your insurance company, then your insurer could cancel your policy.
Many insurance companies reserve the right to cancel your policy for one or more of the following issues:
- Intentional damage to a covered asset
- Criminal record or criminal convictions
- Discovery of erroneous driver information or other policyholder information
- Insured poses a moral risk
- Driver’s license or vehicle registration revoked or suspended
- Too many missed payments
- Excessive claims
- Life changes
- Other changes that significantly impact risk
Insurance is all about risk. Insurance companies want to manage risk. When something changes that impacts risk, insurance companies reserve the right to cancel your policy.
You might have a perfect driving record. Then, you encounter a streak of bad luck. You cause three at-fault accidents in a two-year period. At this point, the insurance company might cancel your policy because their algorithm deemed you a higher risk. The insurance company notifies you in writing, and the insurer cancels your policy within 30 days.
States Allow Insurers to Cancel Policies for Specific Reasons
Each state has its own insurance laws. Different states have different laws regarding policy cancellation.
In some states, insurers are allowed to cancel a car insurance policy mid-term because a driver’s license was suspended or revoked. In other states, insurers cannot cancel a car insurance policy mid-term for all but the most serious reasons.
Virtually every state allows an insurance company to cancel a policy mid-term for missed payments. If you stop paying your insurance policy, then your insurer will stop providing you with car insurance.
Most states also allow insurers to cancel a policy mid-term if your driver’s license is suspended or revoked. If you are convicted of a serious offense or cause an at-fault accident, then the state could suspend or revoke your driver’s license, and your insurer could suspend or revoke your insurance policy at the same time.
Most states also allow insurers to cancel policies for fraudulent claims or customer fraud on applications. If you lied about an incident or accident, or if you lied on your insurance application, then your insurer could cancel your policy.
Some states also allow auto insurance companies to cancel policies within the first 60 days for any reason. If an insurance company finds additional risk factors – like an unnamed driver in your household with a DUI – then they might cancel your insurance policy within the first few weeks.
If an insurer cannot cancel your policy mid-term, then they might fail to renew your policy at the end of the term. After six or twelve months, the insurer might decline to renew your policy, forcing you to find a new insurer.
Insurers Must Notify Policyholders Before Cancellation
In virtually every state, insurers are required to notify you in writing prior to canceling your policy. In all other states, insurers must notify policyholders in some way before canceling a policy. Otherwise, a driver might unknowingly drive without insurance.
Some states allow insurers to cancel a policy for any reason within the first 60 days. In these states, your insurer might quickly cancel your policy with little warning, although the insurer is still required to notify you of the cancellation.
Contact your State Insurance Department for Unfair Cancellations
Insurance companies aren’t perfect. Some insurers act in bad faith deliberately, canceling policies for unfair reasons.
Check your state’s laws and your car insurance policy. If an insurer violated state laws or the insurance policy, then you might have a legitimate complaint.
If you are concerned about your car insurance cancellation and how your insurer approached the cancellation, then contact your state insurance department. File a complaint against your insurer if you believe your insurer canceled your policy illegally.
How to Avoid Car Insurance Cancellations
You can avoid most car insurance cancellations with the following four rules:
Think carefully before filing a claim. If you already have multiple claims on your driving record and are filing an additional claim for a minor incident, then that claim could lead to policy cancellation. Consider paying for minor damages out of pocket to avoid insurance issues.
Drive better. Be a defensive driver. Avoid high-risk situations. If you have multiple at-fault accidents within a short period of time, then it may not be bad luck.
Pay premiums on time. Most insurance companies can and will cancel your policy for missed payments.
Provide complete information to your insurer. Insurance is about risk. Insurers do research to manage risk. You shouldn’t lie to your insurer about your driving record, the primary driver, or other issues. Insurance companies can and will cancel your policy for erroneous or fraudulent information.
What to Do After Policy Cancellation
If your insurer has canceled your insurance policy, then you need to find a new insurer. You cannot renew your policy with your old insurer, and you must find a new provider.
At this point, you can shop for insurance as you normally would. Compare quotes online. Request a customized estimate from one or more insurers. Then, choose the insurer that best matches your needs.
Insurers are required to notify you in writing of policy cancellation. The written notice will include the specific date on which your insurance ends. Your new insurance policy needs to start on this same day. Your old policy expires at 12:01 AM on the date of expiration, and your new policy needs to start on that same date to avoid lapsed coverage.
Cancellations Could Lead to Higher Rates
Unfortunately, a canceled insurance policy could lead to higher rates. If a previous insurer has canceled your insurance policy and stopped doing business with you, then other insurers could see that as a risk factor.
Insurance cancellations appear on your driving record, and future insurers may see this cancellation when you request a policy.
If you have an insurance policy cancellation on your record, then it’s important to compare quotes from multiple insurers to get the best rates. Some insurers see the cancellation as a serious risk factor and will charge higher rates. Other insurers assess risk differently and may ignore a single cancellation.
Final Word on Insurance Companies Canceling Coverage
Insurance companies are allowed to cancel your policy for certain reasons. However, most states require insurers to notify policyholders 30 days prior to cancellation.
Check your insurance policy to verify cancellation requirements. Or, check state cancellation laws.
Some insurers have strict cancellation policies for driving record issues and missed payments. Other insurers have lax cancellation policies. Similarly, some states have generous cancellation laws, allowing insurers to cancel coverage for virtually any reason, while other states have strict insurance laws, preventing insurers from canceling coverage for all but the most serious reasons.
