One of the most frustrating things can be when your insurance company cancels or nonrenews your policy for what feels like no reason at all. While there are a number of regulations in place with states to avoid random cancellations, there are still a variety of reasons for why your insurance company may nonrenew your policy.
What is the difference between a cancellation and nonrenewal?
Nonrenewal: A standard auto insurance policy last from 6 to 12 months, and at the end of that period, your insurance company can decide to your renew your policy and coverage or not. If they choose not to renew your policy, they will provide you with a notification of nonrenewal.
Cancellation: An insurance policy cancellation will usually happen during the initial part of the policy (first 30 to 60 days), but may still happen during the middle of the policy even though it is very rare. In fact, most insurance policies that are cancelled in the initial phase are usually cancelled because the insurance company finds out that your application was incorrect or misrepresented.
Even if you have a bad accident or multiple tickets, your insurance company cannot cancel your auto policy until it comes up for renewal.
Ways to get your car insurance cancelled
- Nonpayment of premium. The most common way to have your policy is cancelled is for nonpayment of premium. Even then, your insurance company must provide you with adequate notice to bring your payments up to date before they can actually cancel the policy.
- Misrepresenting your application. An insurance company can cancel your policy if they find out the information provided on the application was incorrect or untrue. For example, if they find out you have a teen driver in the home that was not stated on your application, they could cancel your policy.
- Fraudulent activity. If the insurance company finds out that you are behaving in fraudulent activity (arranging for your car to be stolen or totaled), then they will cancel your policy and have no obligation to make any claims payments.
Nonpayment of premium. If your policy was cancelled for nonpayment of premium, then most insurance companies will reinstate your policy if you bring the premiums up-to-date.
Note: Most insurance companies will reinstate you back to the date of cancellation; however, some insurance companies will only reinstate your policy on the date payment was made, leaving you with a lapse in insurance coverage. This lapse of coverage can lead to fines and other issues with the DMV. Additionally, they will not pay for any claim that happens during that lapse in coverage.
Having your insurance policy cancelled may make obtaining a new insurance policy much harder to do. In fact, you may have to purchase your insurance from an “assigned-risk” pool where you are assigned an insurance company at much higher premiums.
If you have any questions or concerns about your insurance policy being cancelled or nonrenewed, please feel free to give our office a call.