Having your car insurance canceled can be stressful and confusing. Whether it comes as a surprise or you saw it coming, losing your car insurance can have serious implications.
In this blog, we’ll guide you through why your car insurance may have been canceled, what you should do if this happens to you, and how to avoid it in the future. Keep reading if you want to understand more about car insurance cancellation.
What happens when car insurance is canceled?
When your car insurance is canceled, you are no longer covered for any accidents, damages, or liabilities that may occur. Additionally, driving without insurance is against the law in most states, which can lead to hefty fines, license suspension, and even legal trouble.
If you’re involved in an accident without automobile insurance, you’d be personally responsible for covering the costs of any damage to another’s vehicle, your vehicle, property and associated medical expenses. Financially, this could be devastating.
Just a few years ago, according to the Insurance Information Institute, the average auto liability claim for property damage was $5,313, and the average auto liability claim for bodily injury was $24,211. If this were you, and you had no insurance, it could be financially devastating.
Why would my car insurance provider cancel my policy?
Insurance companies can cancel policies for several reasons. Here are the most common reasons:
1 – Non-payment of your monthly premium
Missing a payment raises an eyebrow that you are more of a risk than they believed when you took out the policy — and it can lead to immediate cancellation.
If your insurance is canceled due to non-payment, your coverage stops immediately, leaving you uninsured. If this happens, it’s important to respond quickly. Sometimes, there is a grace period involved, and you may be able to rectify the issue within the grace period. If you miss the deadline, contact your insurer ASAP to discuss your options and potentially reinstate your policy.
To regain coverage, you’ll need to pay the outstanding balance and, in many cases, a reinstatement fee. You may also face higher premiums moving forward.
2 – Policy violations like fraud or misrepresentation
Policy violations can include anything from providing false information on your application to engaging in illegal activities while driving. If your insurance is canceled due to a policy violation, it can be really difficult to secure new coverage, as insurers will most assuredly view you as a higher risk moving forward.
For instance, if you lied about the primary driver of the vehicle or concealed past accidents, the insurer might cancel your policy upon discovering the truth. Similarly, if there is a teenager with a driver’s learning permit in the home who occasionally uses the car to learn how to drive, and you have not notified the insurance provider, your policy could be canceled.
3 – Claims history is higher than anticipated
Think that your car insurance provider can’t drop you after you file a legitimate claim? They can and often do. If there is a significant change in the risk associated with insuring the policyholder—for example, multiple traffic violations or accidents—the insurer may decide to cancel the policy as they might consider you too risky a client.
If your insurance drops you after you make a claim, it’s important to figure out why. Did the claim show you’re prone to risky behavior? Have you been involved in or at fault with too many accidents in a short timeframe? Has your car been broken into multiple times in the same neighborhood? If so, insurance companies might hesitate to insure you.
Can insurance be canceled without notice?
In some cases, yes. While insurers typically provide notice before canceling a policy, there are situations where cancellation can occur without warning. For instance, if you commit fraud or seriously violate policy terms, the insurer may cancel your coverage immediately.
According to the International Risk Management Institute, the required cancellation notice period is 30 days, but the exact period varies by state and the reason for taking action. Some states extend this period to 60 days, but it can also be as little as 10 days. It’s all based on local regulations and the specific circumstances of the cancellation.
Additionally, insurance companies must outline their cancellation policies and procedures in the policy documents provided to customers. To avoid surprising the insured too much, policy contracts specify the reasons an insurer is canceling a car insurance policy and the time frame and method in which they will do so.
The cancellation letter
Receiving a cancellation letter from your insurance company is a clear signal that immediate action is required. Because it’s such an important step for the insurer, it’s typically done via a printed letter sent via the US Postal Service. You may also get a copy via email, but it’s unlikely notice of cancellation would only arrive electronically.
Your notice of cancellation letter will detail the reason for the action taken and possibly provide recommended steps to correct the situation. For instance, if you missed a payment, the letter might outline how you can pay the outstanding amount to reinstate your policy.
How long does cancelled insurance stay on my record?
If your car insurance gets canceled, your former insurer will report the cancellation to the DMV. This can stay on your record for three to five years, during which other insurers might consider you high-risk, leading to more expensive monthly premiums or difficulty finding coverage.
When you apply for new insurance, insurers are likely to check your record and use it to determine your eligibility and rates. A lapse could indicate a lot of things: financial instability, a history of irresponsible behavior, or an increased likelihood of future claims. As a result, these drivers may be charged higher premiums to offset the perceived risk.
What can I do if my car insurance is canceled?
Wondering what to do if your car insurance is canceled? Here’s how to take action.
Contact your insurance provider immediately
If your car insurance is canceled — for whatever reason — the first step is to contact your insurer. This will help you clarify the exact reason for the cancellation and allow you to ask if you can reverse the outcome. Sometimes, a quick resolution is possible, especially if the issue is related to missed payments or minor violations.
For instance, if your policy was canceled due to non-payment, you might be able to reinstate it by paying the overdue amount plus any servicing fees. Just remember that it’s important to act quickly to minimize the period you are uninsured.
Request reinstatement of your car insurance policy
If your policy was canceled due to non-payment, you might be able to reinstate it by paying the overdue premium and possibly a reinstatement servicing fee. Be prepared to provide any required documentation as proof of continued eligibility, like a valid driver’s license or updated vehicle registration.
Ask your insurer about your rights and any grace periods that might apply, and understand that you may face those higher premiums discussed earlier. Ask your insurer about your rights and any grace periods that might apply. And, as we pointed out earlier, act quickly to minimize the period you are uninsured.
Besides higher premiums, your insurer may ask that you sign a “no-loss statement” before reinstating your car insurance. A no-loss statement certifies that you did not experience any loss that would result in a claim during the period your policy was suspended, lapsed, or otherwise not in effect.
When reinstatement isn’t possible, what coverage options are there?
By now, you’re aware that keeping your insurance active is important to avoid legal problems and higher premiums down the road. So, if reinstating your old policy isn’t possible, start shopping for a new one immediately.
As an independent insurance broker, The Baldwin Group can help you compare automobile insurance options and find policies that suit your needs and budget, even if you have a history of cancellations. And it’s easy. You answer some quick questions about your driving and your car and we do the legwork for you. You can get started with a free, no-obligation online quote or call The Baldwin Group at (813) 939-5288.
What are the consequences of car insurance cancellation?
Learn how license suspension and legal implications could impact your driving privileges and future insurance rates.
License suspension and legal implications
In most states, your driver’s license itself is not directly suspended simply for having your car insurance canceled. However, your vehicle registration can be suspended if your car insurance is canceled and you don’t secure new coverage quickly.
This adds another layer of urgency to resolving your insurance situation and indirectly affects your ability to legally drive. If you continue to drive a vehicle with a suspended registration, you could face legal consequences, including fines or potential license suspension.
There are states where if you’re convicted of driving without insurance, your license will be revoked for a set period of time. In New York state, it’s usually a year. In addition, the driver can be fined up to $1500, and a civil penalty of $750 will need to be paid to the DMV before the license can be restored.
According to Bankrate, California is another state that takes a tough stance on driving without insurance and imposes heavy penalties. For a first offense, your vehicle could be impounded, and you could be fined between $100 and $200, with total costs possibly reaching $400 due to penalty assessments. Repeat offenders can face a license suspension of up to four years, with fines reaching as high as $1,800, plus the cost of getting your car out of the impoundment lot.
Impact on future insurance rates
As we mentioned earlier, a canceled policy can make it harder to find affordable insurance in the future. Insurers may consider you a higher risk, resulting in higher premiums.
According to a report by US NEWS, drivers with a coverage lapse of less than 30 days may see a rate increase of 9 percent, while a lapse of 30–60 days may result in an increase of nearly 50 percent. Drivers with a lapse of more than 60 days may not be eligible for reinstatement at all.
Other factors affecting the potential increase in premiums are the reason for the lapse, the driver’s history, and the insurance company’s policies.
Remember, even if you’re facing higher premiums after an insurance cancellation, The Baldwin Group can help find the best available options at no cost to you.
Tips to prevent future car insurance cancellations
Here are some ideas to help you keep your car insurance coverage intact:
Never miss a payment with automatic payments
Setting up automatic payments can help you avoid non-payment cancellations. Just make sure that you have enough funds in your account to cover your premiums each month. This simple step can prevent missed payments and help guarantee your coverage remains uninterrupted — at least as far as paying your insurance bills is concerned.
Pay annually rather than monthly
Meeting one deadline is much simpler than meeting twelve. Consider paying your insurance premium annually to lower the risk of missing a monthly payment. You might even pay less, as some insurers offer discounts for annual payments. Additionally, this approach eliminates the need to remember a monthly due date, making it easier to maintain continuous coverage.
Know your policy inside and out
Understand what your policy requires of you, and follow your policy terms closely and consistently. For instance, if your policy mandates reporting new drivers in your household, make sure you do so immediately to prevent any potential violations.
Be a safer driver
Drive safely and avoid behaviors that might lead to claims. A clean driving record can help keep your insurance costs down and reduce the risk of policy cancellation.
In fact, many car insurance providers offer a “good driver” or “claim-free” discount to encourage safer driving. MarketWatch reports that drivers with no recent accidents or violations are likely to pay lower premiums and have more stable insurance coverage.
Additional tips
- Review your policy regularly to ensure that it still meets your needs and that you comply with all terms.
- Keep up to date with any changes in insurance laws in your state.
- Stay in touch with your insurer. If you anticipate any issues that might affect your coverage, be proactive and address them early.
So, what did we learn?
If your car insurance is canceled, act quickly by contacting your provider, requesting a reinstatement, and — if necessary — exploring new coverage options. Learn about the potential consequences in your state and with your policy and take steps to prevent future cancellations.
If you find yourself overwhelmed, don’t hesitate to seek advice—The Baldwin Group is happy to help. And if you need to find alternative insurance options after a cancellation, let us know. Our auto insurance experts will help get you insured in no time.
