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What To Do If Your Car Insurance Is Cancelled?

By Aaron Crowe

It’s hard to drive anywhere without car insurance. Or at least it is if you want to drive legally.

Even for a woman in labor who just bought a car, a stop at an insurance agent’s office after leaving the car dealer is necessary before continuing on to the hospital.

For drivers who have their auto insurance cancelled after a policy has started, or have gotten a non-renewal letter as their policy term ends, driving without insurance can lead to plenty of problems if they get in an accident or are pulled over by police.

There are some options, though most are more easily dealt with before the cancellation issue comes up:

1. Pay up. Non-payment is one of the main reasons insurers cancel policies midterm, so paying the amount due on time is the best way to avoid being cancelled for this reason. Who would expect a service if payment wasn’t made?

“They’re covering you and have no premium dollars to ensure that coverage” if you haven’t paid, says Michael Barry, a spokesman for the Insurance Information Institute.

Electronic and automatic payments make paying an insurance bill easier, Barry says.

State insurance commissions require written notice if payment is late, and usually give consumers 10 to 30 days to bring payments up to date.

If you pay up quickly, an insurance company may reinstate the policy, though they may not cover any claims for the time when the policy lapsed.

2. Don’t lie. Lying to an insurer is rare, Barry says, but it happens and can also lead to a policy being cancelled.

Potential policy holders might lie about facts so they can get lower insurance rates, including the make and model of the car, a different address where the car is stored, and not claiming a teenage driver as a new driver on the policy when they start driving the family car.

3. Know your rights. Insurers will provide 30 to 60 days of notice before cancellation, and most states allow new policies to be cancelled during the first 60 days if the insurer learned you lied. Beyond those 60 days, cancellations are rare. Policy holders can appeal to their state insurance regulator, though most insurers will work with customers so they can get the correct information, Barry says.

“They want to keep you as a policy holder,” he says.

4. Don’t get too many tickets. Being an unsafe driver, either through too many speeding tickets, driving drunk or crashing your car, could lead to a policy nonrenewal. This will normally happen when a policy ends.

5. Find another insurer. The good news in all of this is that finding another insurer should be easy, unless you’re such a bad driver that no one wants to insure you. The downside, however, is you could lose a bundling discount if you have homeowner’s insurance through the same company and drop auto insurance with them.

6. Ask your insurer to reverse its decision. As Barry stated above, insurers want to keep customers, not get rid of them. Judi Cineas, a psychotherapist in Palm Beach, Fla., says she took the advice that she gives her clients: Be their own best advocate.

After having her first accident while with an insurer, Cineas got a letter saying the policy wouldn’t be renewed. She called and told them why they should change their decision, and the company agreed and sent her a renewal quote.

But even with the nonrenewal decision reversed, Cineas says she decided to go with a different carrier because the renewal quote was at a higher premium.

By following these tips, you could avoid having car insurance cancelled; along with the higher premiums another insurer will likely charge you after a cancellation.

Aaron Crowe is a journalist who specializes in personal finance topics and covers the auto industry for CheapCarInsurance.net.