If you cancel car insurance policy, it is cancelled by the insurer or it simply lapses with non-renewal, it is a situation you should rectify as soon as possible. Not having auto insurance is a large financial risk; you may even be subject to fines, jail time and criminal charges in certain states. Who and why a policy is cancelled may be secondary to the fact that you currently don’t have coverage even though you own a vehicle.
Still it helps to know the full circumstances that led to cancellation. Then, it becomes clearer what to do if car insurance is cancelled, if you need or want another policy and how much it would cost to reinstate cancelled car insurance policy. Let’s have a look at each situation and see what to do in each case to make sure we don’t break the laws and take huge risks.
Why Would a Policyholder Cancel Car Insurance?
There are very few ‘good’ reasons why you would ever want to cancel auto insurance policy. If you plan to sell your vehicle and are not replacing it you may not need the policy anymore for some time. You may be going out of the country for an extended period of time. Or you may not have to keep it in certain states if you have the financial ability to prove you can cover the costs of an accident and liability claims.
If you simply cannot make the premium payments, but want to continue driving you might want to rethink your options. What happens if you get caught without car insurance is explained in that post in detail. Driving without vehicle insurance has real consequences and in the long term would cost you more money than simply paying the premiums on your policy monthly. Again read what happens if car insurance lapses before cancelling auto insurance.
It could be more sensible to reduce coverage than to cancel car insurance and risk hundreds or thousands of dollars in fines, spending time in jail, having your vehicle impounded or losing the privilege to drive, not to mention the large increase in premium the next time you want insurance. You can check for cheap liability car insurance right here that will keep you insured, legal and financially sound.
Why Would Insurers Cancel Auto Insurance?
There are only a few standard reasons why an insurer would typically cancel car insurance policy mid-term. The first one is obviously non-payment of the premiums. If you cannot pay a monthly premium it would be better to discuss your financial situation with your insurer, switch insurers for a cheaper policy or even lower your coverage instead of simply ‘not paying the bill’. Insurers will also cancel auto insurance policies for those committing insurance fraud.
If you have your license revoked or suspended for driving under the influence of alcohol or drugs or you have been convicted of a major moving violation such as reckless driving, vehicular manslaughter or others there is a possibility of car insurance cancellation. Lastly it may be cancelled if your insurer learns of health conditions that severely impair your ability to drive such as epilepsy, late state diabetes or other conditions that impair driving.
If your auto insurance is cancelled due to non-payment of premium you may be able to get your policy reinstated. However, you may have to pay the full premium to do so with some insurers as they may cancel any instalment arrangements because of the default.
As soon as you receive your notice to cancel car insurance policy you should start your search to find a replacement coverage, if you still can and want to drive. Depending on the reason you may find it hard to get insured at a reasonable cost. In such cases, you may need to talk to your state insurance department to guide you through.
Car Insurance Non-renewal Reasons
Auto insurance non-renewal is a process in which your insurer lets you know that they will not renew your policy on its renewal date and that you will need to find an alternate carrier. In effect it is a cancellation, but is not immediate, allowing you time until your policy expires to find another insurer. The three biggest reasons for car insurance non-renewal include a poor driving record, multiple at-fault claims or you have moved out of state.
Sometimes companies may change their risk profile or withdraw certain markets and that may be why policyholders get refused car insurance renewal. If that is the case you may not have much problem finding alternative insurers. If you are receiving auto insurance non-renewal notice because of your claim or driving history you should be prepared to shop for car insurance online to find an affordable quote.
Difference between Auto Insurance Cancellation and Nonrenewal
Both nonrenewal and cancellation are bad news. However, nonrenewal may be an inconvenience but cancellation is a hindrance when you want to get re-insured by another company. Essentially, cancellation suggests that you have done something to force the insurer to terminate the coverage. Although nonrenewal also means that auto insurance company wants to stop insuring you it is done at a time when the policy is up for renewal anyway.
Since both the insurer and policyholder are allowed to walk away at renewal, nonrenewal isn’t a huge problem. But cancellation suggest that you have done something bad for a mid-term cancellation.
Today a few insurers ask new applicants if their policy has ever been cancelled because they don’t want to take on a driver who has been dropped by another insurer. Furthermore, they can probably check if you have ever had auto insurance policy cancellation. You can still find another insurer but this time you are likely to be categorised as a “high risk driver” that will increase your premium quotes.
Premium Consequences of Cancelled Auto Insurance Policy
The consequences for the pricing of your next insurance policy can be wide ranging and depends on the reason supplied for the cancellation or non-renewal. In most cases your insurance premium has a good chance of increasing with your next insurer or policy. Generally the reason for the premium increase is directly related to the risk that the insurer has to take on to insure you.
If you have a poor driving record, have defaulted on payments, had DUIs, or have serious health impairments, the insurer is taking a larger risk to insure you and therefore you can expect an increase in premiums. If you have moved out of state and that is why you cancel auto insurance policy, often your premiums will not increase except if your new location has higher premiums.
What Happens if Car Insurance Is Cancelled by an Insurer?
You may be thinking, car insurance dropped me now what? If you have had car insurance non-renewal or cancellation for any of the ‘negative’ reasons, it is even more important to get as many quotes as possible. Insurers specialize in different areas, different demographics and different risk ranges. By using cheap auto insurance quoting tool you can get many quotes all at once from one easy process to ensure you are getting the best possible coverage at the right price.
Usually it is not difficult to see an auto insurance non-renewal coming. Don’t wait to check your options until you get the notice. Be proactive to switch insurers instead of being reactive by starting to look around when you are told to go. The same applies to cancelled car insurance policy.