Car Insurance Cancellation and Non-Renewal

We know most people like to “set-it-and-forget-it” when it comes to car insurance, and that a cancellation or non-renewal notice means a small amount of panic. Vehicles require quite a lot of upkeep, so even if we’re used to auto-payments and auto-renewals, there are some factors that could lead to an interruption.

But, as you may now know, disturbances of the peace can certainly happen. There are a few reasons why you may have to deal with either one of these situations and a few things you can do about it to keep your vehicles, and your peace of mind, safe.

Let’s look at both topics in a little more detail to help you understand exactly when and why an insurer can cancel or non-renew your policy.

Are there any guidelines for car insurance cancellation?

There are some guidelines pertaining to when an insurance company can cancel your policy. It would be harmful to drivers if this were to happen without good reason, and especially dangerous if they weren’t aware of any sort of lapse in coverage.

Each State Department of Insurance dictates the procedures and time frames in which an insurance policy can be cancelled or non-renewed. (For more information, read our “How long does it take to get a refund from a canceled insurance policy?“).

Each state may have different rules and each company might have certain policy limitations for its customers, but we’ll outline the basics below.

With regard to the cancellation of your policy being instituted by your insurer, the rules depend on exactly how long your policy has been active.

The basic cut-off point is within 60 days of your policy being issued. Normally, an insurer has a 60-day underwriting window to review any policy an agent has issued.

Tip: Contact your agent or insurer immediately if you feel that your policy has been unfairly cancelled.

The next step is to contact your state department of insurance if you are not satisfied with the answer you receive from your insurer. They’ll help you sort everything out and get you the information that you need.

The laws are very specific and you have rights as a consumer looking for a reliable auto policy.

What do you need to know about your first 60 days of your insurance policy

Your insurer can cancel your insurance policy for nearly any reasonable concern within the first 60 days of it being issued.

Most policies begin and/or are sold at one point, either online or at an independent agent’s office, and are then reviewed at a later date for accuracy and acceptability.

The company will have representatives, either in person, over the phone, or via email, gather information based mostly on what they are told and don’t necessarily have the ability to evaluate the information for accuracy. You will want to make sure that in terms of cost, you’re getting the best deal. Typically they will go over everything with you, but if they use a lot of jargon, it may be hard to understand what you’re paying for.

Nonetheless, they can bind and issue you a policy and you are on your way with coverage.

What are some examples of reasonable concerns?

The information you provide to an agent or insurer at the point of sale is then sent to the company for verification – after a policy is issued and coverage is in place.

The insurer will check your Motor Vehicle Record (MVR) and C.L.U.E report, and in some cases credit history…believe it or not, some people fudge the truth to try to get a lower insurance premium. As is the case with anything, fraud is generally not tolerated; most companies aren’t going to want the type of customers who are willing to stoop to that level.

If the information you provided is inaccurate, the insurer has the option to correct it and charge you a higher (or in some cases lower) premium and continue the coverage if you agree to cough up the money.

However, it is possible the updated information, perhaps a ticket or an insurance claim you “forgot to mention,” will make you ineligible for the program or policy you chose to purchase.

Note: Most insurers “run” these reports during the quoting phase of your insurance application, so don’t be concerned that your new policy may be a ticking time bomb.

[Are online insurance quotes accurate?]

Can you cancel after 60 days?

When the “underwriting” period of your policy has passed and you move into day 61 and beyond, your insurance company can only cancel a policy for one of the following three reasons:

1. Non-payment of premium – you should still receive a 10-day notice (notice times vary by state).

2. Even after 60 days, if it is discovered that you knowingly and/or intentionally misrepresented information on your policy application a cancellation can be issued. Fraud of any kind can trigger this type of cancellation.

3. Perhaps your driving license becomes suspended, or worse, revoked. Insurers have the option to cancel your policy if this happens at any point in your term.

What is considered non-renewal?

Non-renewal is a whole different animal. A policy can only be non-renewed at the end of the term (six or 12 months). Both you and the insurance company can decide to non-renew a car insurance policy.

The insurer will let you know if they decide to take this action. Typically, you can expect to receive a 30 or 60-day advanced notice of non-renewal.

If you decide to non-renew a policy, you simply stop paying for it after it expires. But be careful if you make automatic payments for your car insurance.

The company will simply send you a renewal notice in the mail (as many as 60 or more days before a policy expires) and automatically deduct the money from your account to continue the policy for another term.

At this point you would have to cancel the policy and request a refund of your paid premium.

Tip: If you plan to switch insurance companies and you use some type of auto-pay, let your insurer know at least 75 days in advance to avoid any mistakes regarding your car insurance renewal.

Why do insurers non-renew policies?

There are a couple reasons why an insurance company may choose to non-renew a policy. And it may have absolutely nothing to do with you!

An insurer may decide they simply don’t want to write a particular line (home or auto for example) or class of insurance (homes on the gulf, drivers under 25 for example) and non-renew every policy that fits in that category.

Also, an insurance company may decide to stop writing insurance in one state altogether, which would result in non-renewal for every policy they have in that state.

However, it is possible that something you did during your policy term may have caused your insurer to non-renew you. It depends on the type of insurer your policy is written with.

Perhaps you are with a standard carrier, and as a result of a few tickets or accidents during your policy, you no longer fit their risk appetite.

You would likely be non-renewed and have to seek coverage from a non-standard carrier (types of auto insurance companies).

What’s next?

Believe it or not, a cancellation or a non-renewal may be the best thing that ever happened to you.

Perhaps you were with a national insurer like State Farm or Farmers Insurance for several years and didn’t have any claims.

It is not uncommon for these companies to drop you or significantly increase your premium when you file a claim.

In the event this happens, you will likely have to seek the services of an independent agent who will shop your rate with several insurers.

(Learn more about the difference between a captive agent and an independent insurance agent).

It is also not uncommon for individuals to save money on insurance after switching insurers…even with a ticket or claim.

The national insurance companies with large television advertising budgets typically don’t have the best prices.

They rely on bombarding us with commercials and other forms of advertising to convince us they are the best option.

How do you think they pay for an advertisement to be run at every commercial break on every channel 24 hours per day? They are using your premium dollars to do so.

Read more: Will my insurance rate go up if I file a claim?