What Can You Do if Your Auto Insurance is Cancelled?

By Diane Tait

For most Americans, having access to a car is almost a necessity.  Without it, many of us would be hard-pressed to make a living. Whether you own or lease a vehicle, one of the requirements is that you carry auto insurance. That’s why it pains drivers when they’re dropped by their insurance companies.  While many drivers consider it a slap in the face if they’re denied coverage, what they don’t realize is that insurance companies can be on the hook for much more than the premiums should a policyholder get in an accident.  If you’re ever denied coverage, there are a few things you need to know. 

Why were you dropped? – When it comes to insurance, the industry carefully balances risk versus reward.  What this boils down to is that insurance companies are looking for drivers who pose little in the way of risk.  If you get a ticket or two, get in a fender bender, or file an occasional comprehensive claim, the worst that could happen is your rate will go up accordingly.  However, if your driving record and personal habits indicate a high risk, some insurers may decide that the risks outweigh the rewards.  When this happens, it isn’t unusual for an insurance company to refuse to renew or even cancel a policy outright.  Here are a few reasons why this can occur:

1. Has your coverage lapsed? If you allow your auto insurance to expire due to non-payment, it could prove difficult to get another insurance company to cover you.  Nobody likes to be paid late.  While many businesses will simply assess a late fee, in the case of insurers, many will drop you like a hot potato if you miss a payment.  So important is this fact to insurers that many will offer a discount if you opt to automatically pay your insurance via credit card on a monthly or bi-annual basis. Since driving without insurance is considered a criminal offense, if you don’t want to wind up in even hotter water, you need to make sure you pay your premium on time every time.
2. Do you have a lead foot?  You could wind up being dropped if you rack up too many speeding tickets.  The same can happen if you get pulled over for DUI or reckless driving.  If you value the privilege of driving, you need to take care when you climb behind the wheel.  Get one too many tickets or have your license suspended and you could find it difficult to acquire coverage. 
3. Been in one too many accidents? If you’re involved in several accidents where you are labeled the at-fault driver, you may not only find that your current insurance company is looking to part company with you, it could prove extremely difficult to get another carrier to cover you as well.
4. Liar, liar policy on fire. Another way to wind up without auto insurance is to misrepresent yourself in any way to an insurance company.  Give even a single erroneous answer on your insurance application and an insurer can cancel your coverage on the spot should the falsehood be discovered.  Better to be honest and let the chips fall where they may than to bend the truth in any way to your insurance agent.
5. Fail to respond to calls from your insurer and your policy could be put on hold.  If your insurance company attempts to reach you by phone, this is one call you want to take.  Fail to respond in a timely manner and you could wind up having your coverage dropped.  Read the fine print on your policy and you’ll find the phrase, “the insurer has no duty to provide coverage unless the insured is in full compliance.”  Failure to reply could be construed as a failure to comply.

What can you do if your insurance company threatens to drop your coverage?  If your insurer has notified you that your coverage is being dropped there are several things you can do:

1. Call them to see if there’s anything you can do to reverse the decision. Instead of getting mad, get chummy with your agent to see if there’s any way to get reinstated.  Even if you have to pay a fine, it’s better to work it out with your current insurer than to have to hunt down a new one once you’ve been dropped.
2. If you think you have a case and the cancellation is unfair, consider appealing the decision to the Department of Insurance.  This way you’ll have a chance to be heard by someone in authority to do something about the situation.
3. If non-payment was the only reason you were dropped, offer to opt-in for autopay or offer to pay your premium in full for the year.  That may give your insurer reason to offer you a second chance.
4. If you still live at home or are attending college, you may be able to qualify under your parent’s auto insurance.   Of course, you’ll have to convince your parents that it’s worth the risk to help you acquire coverage.
5. If all else fails, ask your insurance agent to recommend a high-risk auto insurance provider.  While it won’t be cheap, at least you’ll be able to legally drive.  The higher premiums will also be incentive enough to change your driving or personal habits so that you’ll be able to qualify for cheaper coverage next year.

What’s the difference between a policy cancellation and a non-renewal? Plenty.  While cancellation is a reaction to something you did or did not do, a nonrenewal is an action taken by the insurer to avoid renewing your existing policy.  Their reason could be that they are dropping the coverage for the make and model of the vehicle you drive, or the company has decided to stop offering that type of coverage in your geographic area.  The good news is that an insurer is required to give you adequate notice of nonrenewal so you can shop for a new insurance company before your coverage lapses.  A nonrenewal also won’t cast you in a bad light to any other insurer as a policy cancellation will tend to do.

Diane Tait owns and operates A&B Insurance.  To find out more about how you can save money on boat insurance, go to her site.