What Is the Underwriting Period for Car Insurance?

Auto insurance underwriting period allows companies time to check and verify the details provided by a new policyholder to determine if they are totally happy with the risks presented. In every state, car insurers have the right to cancel a new policy if they find the risks to be too high, in the early days after the activation. This period is known as underwriting, binding or waiting period and usually gives 60 days from the start. Carriers still have to give 10 – 20 days notice but they can terminate the policy if they don’t like the risk for any reason within the law.

Underwriting periods allow vehicle insurance companies to insure an automobile based on the information provided by the applicant and carry out their checks after. If they find anything in this binding period that they don’t like or contradict the information given by the policyholder they can decide to cancel the policy. After this initial 60 days underwriting period, car insurers have limited reasons to cancel a policy like non-payment of premium, driver license suspension or fraud.

Automobile insurance companies or their agents rely on the information provided during the quote process but have a few ways of verifying the details and fact checking and they can look at the following reports to determine the true risk profile and acceptability of it;

  • They check driving records of the drivers listed on the policy. These records include accidents, traffic violation convictions and past license suspensions.
  • Credit history reports provide financial background on their new policyholders and also work as a fact sheet to confirm things like residence and people residing in the same household as they show up on the report.
  • CLUE report details pass claims someone has submitted, including the type of losses, size and who was at fault.
  • VIN check confirms the details about the vehicle insured, including its past accident history like if it is ever totaled and currently has a rebuilt title.

Any discovery of new information on these reports can tilt the balance of risks and result in termination of the policy. However, if the policyholder has provided all the relevant details honestly and accurately, there is usually no reason to worry about. Nevertheless, there may be new tickets in that 60 days vehicle insurance underwriting period to take into account.

However, auto insurance companies’ decision to cancel the new policy in the waiting period has to be legal and therefore cannot be for any discriminatory reasons like race, color, age, gender, religion and redlining people in certain locations. Also, it has to be a valid reason but most risk related concerns would be acceptable in this period that makes it easier to turn down an applicant and end the coverage in place.

This may appear to present a risk for people who just switched to the new automobile insurer. Nevertheless, it actually makes it easier for the carriers to accept new applicants, place them on cover and ask questions during their underwriting process that can take 30 – 60 days. When they offer the quote, they do so in good faith but they are allowed to do their due diligence.

Not only do insurers check the above-mentioned reports but also they can ask for further verification from the policyholder and this may take time. For example, companies can verify your address from your credit report since it lists the addresses you have lived in. However, if you have just moved to a new address it wouldn’t show on the report yet and therefore the company may write to you and ask to send in proof of your address like a copy of the lease, recent utility bill or mortgage statement.

There is a process in place and a 60 days underwriting period for vehicle insurance is there to grant them time to conclude it. This binding period is there to let companies do their things while the vehicle is insured, rather than waiting for them to complete their checks before offering coverage. Finally, the underwriting period is only allowed for new policies and cannot be applied for renewals.