Have you ever gotten into a fender bend or a routine traffic stop and suddenly can’t remember where your insurance ID card is or the last time you paid for car insurance? Even if you’ve never been delinquent, such feelings happen to all of us. Car insurance is also known as proof of financial responsibility, and it is our responsibility as licensed drivers to maintain ongoing coverage or risk facing costly consequences. Bankrate’s insurance editorial team has put together this guide on what to do if your car insurance is canceled, how to recover, and tips on how to avoid it in the first place.
Can your car insurance company fire you?
Your auto insurance company may cancel or “drop” your coverage, but usually with enough notice to get new insurance and avoid lapses in coverage. Each state and Washington DC have different regulations regarding the amount of advance notice required to cancel a policy, ranging from 10 to 60 days.
In most cases, your auto insurance company will physically mail you a cancellation notice stating the last day of your coverage period, the reason for the cancellation, and the steps (if any) to be taken to avoid cancellation. Even if you are enrolled in a paperless program, you will typically receive a physical letter and an email or text.
The most common reasons car insurance is canceled are:
If your policy has been in effect for less than 60 days, there may be more scenarios that could lead to cancellation.
What to do before paying your car insurance
Although most drivers don’t intentionally let their auto insurance policy lapse, mistakes do happen. Many auto insurance companies consider losing your auto insurance coverage a risk, so your premiums may increase if you re-insure. Here are some of the most effective ways to avoid unpaid cancellations.
- Pay the full premium at each renewal: This option isn’t affordable for everyone, but paying the full premium each time you renew means you don’t have to remember to pay your premium once or twice a year, and typically can avoid paying service charges.
- Enroll your insurance policy into an automatic payment plan: Most carriers offer automatic payments for various payment plans. This is suitable for customers who prefer to “set it and forget it.”
- Set up automatic bill payments with your bank: Policyholders who do not feel comfortable providing their banking information to third parties may be able to enroll in a bill payment plan. With this option, your bank transfers money directly to your carrier instead of your carrier automatically requesting payment.
- Set a reminder on your phone or email calendar: Whether your policy is enrolled in automatic payments or you’re making individual payments, setting reminders will help you remember when your payment is due and ensure your funds are available.
Policyholders looking for creative ways to save money should check with their insurance agent to see what payment plans offer savings opportunities. Apart from full payment discounts, carriers tend to offer discounts for policies set up with automatic payments through a bank account instead of a debit or credit card. Plus, you could save even more by signing up for a paperless billing and policy plan.
What is the difference between canceling and non-renewal of an insurance policy?
There are two types of insurance cancellations, and understanding the difference between the two will help you know what action to take. Insurance policies are typically renewed every six or 12 months. When a policy is not renewed, it means that the insurance company has decided not to provide coverage for the next policy period. In these cases, your insurance company will notify you before renewing and give you time to purchase new coverage. Car insurance cancellation laws vary by state, but policyholders typically receive non-renewal notice 30 to 60 days before their policy expires.
Reasons why insurance companies initiate non-renewal of insurance contracts are as follows:
- Insurance does not meet carrier underwriting standards
- There are too many surcharge points due to accidents and moving violations.
- The company has decided to stop offering insurance in your area
On the other hand, insurance cancellation means that the insurance is canceled at a time other than the renewal date. Cancellations only occur for very specific reasons. Once you purchase insurance, the insurance company typically issues a cancellation within 60 days and decides not to provide long-term coverage. After that, there are usually only three reasons why you can cancel your policy:
- The coverage period has expired due to non-payment of insurance premiums.
- committed fraud or lied on an insurance application
- An event occurs that causes your insurance to no longer meet your carrier’s underwriting standards, such as a DUI conviction
In the table below, Bankrate’s insurance editorial team outlines the key differences between policy cancellation and non-renewal.
| cancel | Not updated | |
|---|---|---|
| time frame | Within the first 60 days of the coverage period or for special reasons. | At the end of the insurance period |
| Notification required | Depends on the reason for cancellation | Varies by state. Usually 30 to 60 days |
| Reason for termination | Usually related to fraud, material misrepresentation, or nonpayment | Various possible reasons, such as the number of insurance claims filed, the vehicle or driver no longer meeting the carrier’s requirements, or a change in the carrier’s service area. |
What should I do after canceling my car insurance?
If you receive an auto insurance cancellation letter, first determine the type of cancellation and how long you need to find replacement coverage. Whatever the reason for cancellation, be sure to secure coverage before your policy expires.
If your auto insurance coverage has been terminated, try these steps.
- See if your provider is willing to consider restoring coverage. “If you can negotiate with your insurance company and get a recovery, that’s the first step most people want to take,” said Amy Buck, executive director of United Policyholders, an insurance consumer group in San Francisco. do. Contact your insurance company, determine the reason for the cancellation, and ask if your coverage can be easily reinstated. In some cases, something as simple as addressing late payments can get your coverage back on track.
- File a claim with your state’s insurance commissioner. Your state may be able to help. For example, in Illinois, you can seek help from the Department of Insurance, which holds insurance claim hearings. This may be useful if your policy is canceled or not renewed due to rectified circumstances, such as removing an ineligible vehicle from your policy.
- Find a new insurance company. If your insurance company refuses to continue your policy, we recommend that you collect quotes from multiple insurance companies and start looking for a new one. That’s why it’s important to know when your insurance policy ends so you can get coverage before it expires.
Can I object to the cancellation of my car insurance?
Depending on the reason for cancellation, you may be able to reach an agreement with your carrier. For example, cancellation of an insurance policy related to non-payment will usually give you time to make the payment before the cancellation takes effect. You may be able to make payment arrangements with your carrier to keep your policy in effect. However, if your car insurance is canceled due to your driving behavior, you may need to find another insurance company that specializes in high-risk drivers.
You can also contact your state’s insurance department to file a complaint if you believe your policy has been unfairly canceled. In some states, you may be protected from cancellation for certain reasons, such as age. The state insurance department may investigate whether the cancellation is justified. Most states have procedures for contesting insurance policy cancellations.
If my car is dropped, will it be difficult to get insurance?
Unfortunately, if your auto insurance company discontinues your coverage, depending on the reason for the cancellation, it may be difficult to obtain another insurance policy or your premiums may be higher. Reasons that often lead to revocation, such as a suspended license or driving behavior, may be seen by other insurance companies as evidence of high-risk behavior and generally make your auto insurance more expensive.
However, some companies offer high-risk auto insurance, so canceling your policy as a result of a driving accident doesn’t necessarily mean you won’t be able to find replacement coverage. If you have an accident, ticket, or DUI conviction, your premiums may be higher, but you may be able to find some kind of coverage that meets your state’s minimum requirements.
If you can’t get new insurance with another insurance company, you may be able to get coverage through your state’s “assigned risk” program. This type of auto insurance is typically available to high-risk drivers who have difficulty purchasing insurance on the private market.
Penalties for driving without insurance
Even if you don’t cause an accident or commit a traffic violation, driving without insurance can result in various penalties.
- higher insurance rates: Many trucking companies charge higher rates to drivers whose car insurance has recently lapsed. On average, drivers with lapsed insurance pay $2,606 per year for full coverage auto insurance. This is 11% higher than the national average non-lapse premium.
- State fees for uninsured: States with automatic reporting allow insurance companies to notify you when a policyholder cancels their policy. If your vehicle’s license plate is not returned to the state, you can face heavy fines along with license and registration suspension. For example, in New York, drivers who drive without insurance are fined $8 per day. After 30 days, the fine increases to $10 per day and after 60 days, the fine increases to $12 per day.
- Towing and repossession fees may apply.: Drivers who park their cars on public roads have the added worry of having their cars towed and repossessed because they don’t have auto insurance. You must first pay your vehicle insurance premium and then pay a holding fee to return the vehicle. Tickets related to parking violations can usually be paid at a later date.
- Financial risk of having an accident without insurance: Even if you didn’t know your insurance was canceled, you are still financially responsible for the accident you caused. If you don’t have valid auto insurance, you’ll have to pay out-of-pocket for personal injuries and property damage.
