The Difference Between Auto Policy Cancellation and Non-renewal

January 23, 2018

When you receive a notice of cancellation or non-renewal from your insurance provider, that could only mean you are now cut off from the service and can no longer take advantage of your insurance policy. But while both results to the same thing, they each mean differently.

Let’s break down this common insurance misconception.

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What is an insurance cancellation?

Your insurance provider or company cannot cancel your policy after 60 days that it has been in force. That means a cancellation cannot happen in the middle of your policy period, except for some extenuating circumstances that could provoke the company to do so – including a felony conviction.

Typically, a policy holder’s insurance is only canceled when:

(a) They have failed to pay their premium

If your regular premium payment is delayed, your insurer will send you a notice to pay the due or a cancellation will be in line. A date of cancellation will be on the notice. If you fail to settle the due until the said date, your insurer will automatically cut off your policy and the Department of Motor Vehicles(DMV) will be notified that you are no longer insured.

You may convince your insurer to reinstate your policy and they may do so based on your payment and driving history so if you’ve had multiple traffic violations in the past, that could be a problem. If they say no, you would have to find another provider.

(b) they have committed false representations or fraud in their insurance application

Lying on your auto insurance application can have a drastic impact if you get caught. That’s why you are highly encouraged to be honest with your driving record and history, no matter how bad it may look. In the long run, it’s better to get a high premium and work on your driving or get denied on some of your applications than have your policy canceled.

(c) the policy holder’s drivers license has either been suspended or revoked for some reason

A license suspension is temporary. You can have a suspended license reinstated after you have satisfied the conditions for reinstatement imposed by your county judge, court officer, or the DMV. However, having your license revoked is a permanent one. A person with a revoked driver’s license can never drive legally anywhere in the United States.

While violations of driving laws can lead to license suspension, successive violations will lead to revocation.

Either way, if a policy holder finds himself or herself in this situation, he or she can expect a cancellation to be due.

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Having your insurance policy canceled is generally bad news as you will certainly face some difficulties in finding a new provider who will give you a new policy. Any insurance company looks into the driving and insurance history of their applicants and knowing that you have one insurer already cancel your policy raises more than a red flag about your dependability as an insurance holder.

What is a non-renewal of a policy?

A policy non-renewal is a decision that either you or your insurance company makes. Either party can decide not to renew the policy after its expiration date.

If it’s the company dropping you as a customer, they will issue a notice of non-renewal within a certain number of days (this is dependent on the rules set in your state) of a policy renewal date, along with an explanation as to why they are not renewing.

There are a number of reasons why your insurer would choose to do so and these are not personal. For example, the company decides to no longer serve that insurance line, or to no longer write policies for customers within the area you live in. Or, it could be that you’ve had recent grave driving misconduct that increased your risk as a policy holder so the company decided to drop you as a customer.

If you think the reason for non-renewal is unsatisfactory or erroneous, call the company immediately. If you are unable to settle with them and believe you deserve a rather reasonable response to your complaint, you may contact your state insurance department.

A policy non-renewal isn’t as terrible as a cancellation. However, if you receive such notice, you would have to take immediate action and find a new provider to prevent an insurance gap.

Talk to our Insurance Specialists for your insurance concerns.

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