When Can Your Car Insurance Be Canceled?

When Can Your Car Insurance Be Canceled?

You don’t want to get a cancellation letter from your car insurance company. For starters, there’s the inconvenience of finding a new insurance company, or trying to straighten out the issue with your current insurer.
Car Insurance
Car Insurance

Second, there’s the hit to your wallet: Having a cancellation on your record, and the specific reason for the cancellation, can lead to higher rates when you shop for a new policy. You’ll be seen as a “risky” customer and charged more.

Car insurance can be canceled for a variety of reasons, often dictated by state laws. The No. 1 most common acceptable reason for cancellation is that you didn’t pay the premium on time.

Car Insurance
Car Insurance

Because of the COVID-19 pandemic, recently auto insurance companies have rolled out ways for customers to avoid cancellation. These include extended car insurance grace periods, payment plans and putting a hold on cancellations. Contact your auto insurance company to find out its options if you’re having trouble paying.

Here are other common reasons for car insurance cancellation:

You didn’t fully disclose necessary information in your auto insurance application. Your car insurance company relies on several factors to set your rates, such as your vehicle’s “garaging” address, and who drives your car regularly. Failing to accurately report this information is often referred to as a “material misrepresentation”.

You have too many at-fault accidents or moving traffic violations. Generally, if you cause too many accidents or get too many traffic tickets (like speeding tickets) within a certain time frame (generally 36 months), your insurance company could cancel your policy.

Your driver’s license or vehicle registration was revoked or suspended. Generally, if you have your license or registration revoked or suspended within the policy period, or often within 36 months before the notice of cancellation, your policy could be canceled. If a regular driver has their driver’s license suspended, your car insurance company might require you exclude them from the policy, meaning they are no longer covered. If they do drive, the policy could be canceled.

You made a fraudulent claim. If you file a claim, or someone else makes a claim against your insurance policy, you are expected to provide complete and accurate information. If you purposely fail to do so, your car insurance company could cancel your policy.

You have a medical condition that affects your ability to drive safely. Health conditions like epilepsy and heart attacks can require a certificate from a physician testifying to your ability to drive safely.
You were convicted or forfeited bail for certain offenses. If you or a regular driver commits a felony, like driving under the influence, your policy can be canceled.

Your car isn’t safe to drive. If your car has mechanical problems to the point it endangers public safety, your policy could be canceled. Also, if your state requires inspection and you do not get your car inspected or it fails inspection, that may be grounds for cancellation.

You use your car for business purposes. A personal car insurance policy generally doesn’t cover business use. For example, if you use your car to visit job sites or make deliveries. If you use your car for work (aside from commuting to work), you likely need a commercial auto policy.

You drive passengers for hire. If you use your car like a taxi or for a rideshare company like Uber or Lyft and don’t tell your insurer, it might cancel your policy.

Auto Insurance Cancellation vs. Non-renewal

Another way to lose your auto insurance is through non-renewal. This happens when a policy is due for renewal and the insurer decides not to continue it after the policy expiration date.

Reasons for non-renewal can be similar to cancellation, such as nonpayment and misrepresentation on an application. Some states, such as New York and Oregon, allow credit information and/or your auto insurance score to be a reason for non-renewal by an auto insurer.

How Do I Find Out If My Car Insurance is Canceled?

A car insurance company is required to give you advance notification of cancellation, typically sent by mail or electronic delivery.

The time frame for advance notice varies by state and the reason the policy is being canceled:
Cancellation for nonpayment typically requires 10 days notice of cancellation.
A notice of cancellation for other reasons, like a driver’s license suspension, can generally range from 20 to 45 days, depending on the state.

If you receive a cancellation notice, you’ll want to deal with it immediately. If you think the insurer has misinformation, or the reason is a late payment, ask if you can resolve the issue before cancellation.

If you think the cancellation of your car insurance policy is unfair or unlawful, and you can’t resolve it with the insurance company, you can contact your state department of insurance. State departments of insurance are the official takers of complaints against insurers, not the Better Business Bureau (BBB) or other organizations. And if a department of insurance sees a pattern of unfair cancellations, it could take enforcement actions against the insurer, such as fines.

What Happens If Your Car Insurance is Canceled ?

After a car insurance company cancels a policy, it is required to notify the state’s department of motor vehicles. When you lack car insurance, your state could require you to turn in your car’s tags.

Driving without car insurance is illegal in all states (except New Hampshire and Virginia) and could result in penalties, including driver’s license suspension, fines and even jail time in some states.

In addition, if you cause an accident while driving without insurance, you could be responsible for paying out-of-pocket for any damages, including costly medical bills.
Can You Get Car Insurance After Being Canceled ?

You can still typically get car insurance after a cancellation, but expect to pay higher premiums because of it. To save money, compare car insurance quotes from several different insurance companies.

Regular drivers without major driving record issues and past claims typically have “standard” auto insurance policies. But in some cases, a history of accidents, lapses in coverage and, yes, cancellation, can make it hard to find any company willing to sell you a standard policy.

These drivers can be forced into the “non-standard” market, where there are fewer insurance options and higher insurance rates. Non-standard auto insurers include Dairyland, Direct General, Gainsco, The General and Infinity.

As a last report, you can get coverage through your state’s “assigned-risk pool.” Car insurance companies in every state must participate in the state’s assigned-risk pool by taking a certain number of drivers, based on the insurer’s amount of business in the state. These assigned-risk policies will be expensive, but it’s a way to get auto insurance. On average, only 1.3% of vehicles insured in the U.S. are in an assigned-risk plan, according to the Insurance Information Institute.

If you’re unable to find coverage, contact your state insurance department for more information on the assigned-risk pool.

What Happens If I Get Caught Driving Without Car Insurance?

Driving without car insurance can have both legal and financial consequences. That’s because every state has some form of “financial responsibility” law, which basically means that you must show you can pay for others’ medical bills and property damage if you cause a car accident. Most folks satisfy this requirement by purchasing auto liability insurance.

Here are two ways that driving uninsured could cause serious financial and legal pain.

Causing an Accident Without Car Insurance

If you cause a car accident while driving without insurance, you could be hit hard by out-of-pocket expenses to pay for others’ medical bills and car repairs. For context, the average nationwide cost of a bodily injury claim is more than $20,000 and the average property damage liability claim is about $4,200, according to the most recent data from the National Association of Insurance Commissioners.

People who drive without insurance end up costing everyone else. Because an uninsured driver may not have funds to pay a legal judgment, other drivers protect themselves by purchasing uninsured motorist coverage in case they’re hit by an uninsured driver.

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