How Many Claims before Car Insurance Cancels?

Some people think that they have coverage and they can make as many claims as they want. This is perhaps true up to a point but things can get ugly after that. Your premium is set based on the information provided at the time of purchase. When new information comes to light, the insurers reconsider the risks and premiums. They may even feel that they don’t want to insure your vehicle anymore.

They have to make a choice just like everyone else and they have to be profitable just like any other business. Insurance companies naturally prefer that their policyholders never make claims and keep paying premiums. But they equally know that claims are part of their business and they vary in seriousness.

First thing underwriters look at after a claim is that was it your fault. When a claim is made after an Act of God event like weather related damages they cannot really penalize their policyholders for it. Your rates may go up mainly because they start taking future bad weather conditions and possible losses they may suffer into account at your renewal.

Also, there are accidents that weren’t your fault. In such cases, it would be best if you could claim from the insurers’ of the drivers who caused the crash. Then, there is no reason for your insurer to get involved. If your insurer ends up paying for your damages they would put it down as a claim and it would probably affect your renewal rates.

And many of them don’t get alarmed after just one accident even it was your fault, especially if you had a good driving history before. That is why they are comfortable selling Accident Forgiveness Coverage that promises not to increase your premium after the first accident.

Nevertheless every claim counts when they consider keeping a policyholder or dropping. Companies are known to pull out of an entire region or raise their rates substantially due to too many weather related claims they receive.

Some people think that they should claim for every little thing to get their money’s worth. This may prove to be a wrong decision, especially when the number of claims starts adding up. Particularly, young drivers should try to avoid smaller claims because they would usually come back as premium increase, if not refusal to renew.

The number and frequency of claims are key factors affecting insurers’ decision not to renew a policy. However, It is fair to say that at fault accidents are the most likely claims that can lead to a decision to stop insuring you.

Essentially, the decision depends on many factors including your insurer, state regulations and profitability. An established insurer wouldn’t worry much when it comes to dropping a few high-risk policyholders. In the same way, there are insurers who are specialized in high-risk market. When the former would choose to drop a driver the latter may prefer increasing their already high rates.

As a general rule, two at fault accident claims in a short space of time can easily lead to cancellation of your policy, probably at renewal. But various combinations may do the trick too. Even 2 or 3 negligible claims may result in a drop especially if they were in a short space of time.

One good news is that most carriers would wait until renewal to drop a policy and they would give you enough notice to find alternative provider. Once a policy is more than 60 days old, it is harder to cancel it. Most states allow insurers to cancel policies that are less than 60 days old, even without a reason.

It is hard to say how many claims result in cancellation or non-renewal of your policy. But it isn’t all about the size of the claim. Number of claims is as important as well as how long it took you to make them. Essentially, that decision rest with the insurer and they are different too. That is why isn’t the end of the road when one company drops you. You can probably get insured again with a little work even though you would probably pay a lot more.

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