Can My New Auto Insurance Company Cancel a Fully Paid Policy?

Car insurance process starts with motorists answering a few questions about themselves, other drivers listed, the vehicle and other relevant details like credit score. Once a quote is accepted and agreed premium paid, companies can go ahead and provide coverage based on this information. That is why most states allow vehicle insurers a policy binding period up to 60 days to fact check and decide to keep providing the coverage or cancel.

Essentially, companies have no reason to suspect applicants and perform a thorough check to give a quote. Besides, the policy contract is based on the information provided by the applicant. If the detail provided in an automobile insurance quote form checks out, there is no reason for the provider to take any further action.

Then, companies perform their own checks. Most states give companies a 60 days binding period but some states may only give 30 days. If there are any discrepancies on the application relating to things like accidents, traffic violation tickets, listed drivers or credit score, they can cancel the entire policy. Some companies may offer the option of keeping the coverage if the policyholder agrees to a higher premium in minor discrepancies.

Auto insurers may cancel new policies within this binding period without giving a reason. However, policyholders can appeal and ask for the reasons. Companies cannot refuse coverage based on race, gender, religion or any other discriminatory reasons. But not liking the risk after new revelations would be good enough in these 60 days. After this binding period, they can only cancel a policy for a serious reason like nonpayment of premium, license suspension or fraud.

In any case, the majority of states require car insurance companies to give ten to twenty days notice before they can terminate a policy. This allows motorists time to make alternative arrangements.

You would need to look for yet another coverage if you are dropped shortly after switching. This may sound annoying but it is a rare occurrence to be bothered about. Carriers check carefully before they place any vehicle on risk and they don’t usually like to lose paying customers.

A car insurance company has a certain period to change their mind about a new policy they issued. For example, this is 60 days in Pennsylvania. They can cancel it within this period if they are not totally happy with the risks they took or they discovered new information.

This may sound unfair but policies are based on details provided by applicants on proposal forms. Until someone contacts them for a quote, vehicle insurers have no idea about such a person. Most of the time the particulars are accurate and no action is taken. This assumption of information provided being true allows the industry to arrange coverage swiftly. That is why it may be understandable that states allow them to change their mind.

Reading this post, people may think that automobile insurance companies are quite finicky in the way they do business. It is not the case and such cancellations hardly ever happen, especially if the information provided is accurate. So, good to know about it but it is not something most motorists should lose sleep over. Usually, insurers act on something big that they cannot overlook. For example, too many speeding tickets on the record that weren’t mentioned before or a new ticket could tip the balance against.

So, you can check and get auto insurance quotes to your heart’s content and switch if you want. You should make a clean record count and get the best value coverage. There are countless studies showing that loyal or lazy drivers are not usually rewarded. Often, the latest offers are used to attract more customers and not to keep the existing ones happy. This is another piece of information to know too.