Can Auto Insurance Companies Drop You?
Getting into multiple car accidents or racking up a bad driving record might have you worried about your car insurance. Auto insurance companies are known for their strict requirements and penchant for increasing premiums. But can they just drop your coverage?
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Luckily, the law covers you in this respect. There has to be good reason for an insurance company to drop your policy mid-term. We’ll discuss those reasons below. However, in most states, insurance companies can choose not to renew an insured’s policy if they believe you are a ‘high risk driver.’
The Difference Between Cancelation and Non-Renewal
There are two ways an insurance company can ‘drop’ you. In the literal sense of the term, they cancel your policy. It’s fairly unusual for insurance companies to do this mid-term, though. Under extreme circumstances, they may be allowed to do so if you do any of the following:
- You don’t pay your premiums
- You lose your license because of a DUI or other major offense
- You committed fraud on your application
These are the most common reasons auto insurance companies can drop you. If, however, you pay your premiums, don’t drive drunk, and are honest in your dealings with the insurance company, you should be okay.
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Non-renewal isn’t as extreme as a cancellation. Yes, in the true sense of the word, the company still drops you. However, they do so at the end of the term as they choose not to renew your policy for the next term.
Non-renewals are much more common. We will discuss the reasons an insurer may not renew your policy below.
Common Reasons for Non-Renewal
What could make auto insurance companies not want to renew your policy? We take a look below:
- You are a high-risk driver – The more claims you make on your insurance in a short amount of time, the higher risk you become. Insurance companies don’t like to pay out on claims. They’ll either increase your premiums or not renew your policy.
- You pose a serious liability – Some insurance companies may keep an eye on your credit score. If it drops suddenly due to you not paying your bills or having multiple collections, the insurance company may not renew your policy.
- The insurance company doesn’t offer the same insurance – It’s not unusual for insurance companies to realign their business practices and eliminate certain types of insurance. If they don’t offer the policy any longer, they cannot insure you.
Will you Have Notice?
The biggest worry is how you will get coverage right away. It’s the law that you have auto insurance, so you have no choice but to find new insurance. Luckily, most insurers give you between 3 and 4 weeks’ notice before they cancel your policy. This should give you ample time to find a new policy with a new insurer.
Of course, if you suspect your insurance company may drop you, it makes sense to start shopping around before you even get a notice. If you know that it might be hard to find coverage because you have had many claims recently or you didn’t pay your bills on time with the current company, you may have a lot of work to do to find a new insurance company. The sooner you start, the better off you’ll be.
How to Avoid Cancellation of Your Auto Insurance
So what can you do to prevent being dropped from your insurance? Try the following:
- Pose a low risk – Be a safe driver. If you get into an accident, but it’s not your fault, you won’t’ have to worry as much. If, however, you cause several accidents in a short time, you are high-risk. Take a defensive driving course and obey the law. This is the best way to protect your coverage.
- Be honest – When you apply for new insurance, make sure you are truthful on the application. In addition, always be honest when filing a claim or dealing with the insurance company at all. Fraud is a crime and can leave you without insurance as well as legal troubles in your future.
- Pay your bills – Don’t pay your car insurance late. Some companies have a grace period, but others don’t. Even if they do have a grace period, they don’t want you using it. They want their money on time.
These simple steps can help you keep your car insurance. If you do get dropped, don’t panic. There are many other auto insurance companies out there. You can shop around and find the policy that works for you. If you do get notice of cancellation of your policy, make sure you act fast. You’ll need to find a new, willing insurance company quickly.
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