Insurance

13 surprising car insurance cancellation laws to know

Learn what to do if you're dropped from your car insurance

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In January, you had a fender bender in a parking lot. Then, in March, you got a ticket for accidentally running a stop sign. These things can happen, even to good drivers. But when they build up, your insurance company may begin second-guessing your coverage. 

Driving mishaps can have implications that go beyond a large repair bill. If you’re the cause of multiple accidents, your car insurance company can elect to drop you from their coverage — deeming you a higher risk now than you were when the policy began. 

Frequent accidents are a common reason to be dropped, but there are other instances where your insurance company can choose to drop you from coverage. States tend to have their own set of laws when it comes to car insurance cancellation — some of which are more unique than others. 

In this article, we’ll highlight common reasons someone can be dropped from car insurance, 13 states with unique car insurance cancellation laws and the consequences of getting dropped by your car insurance provider.

Common reasons for car insurance cancellation

While reasons for car insurance cancellation differ by state, a few are relatively consistent nationwide. Some of the most common reasons for cancellation include: 

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Remember that it’s illegal to drive without insurance. Therefore, if any of the above happens to you and you get dropped from your insurance, you won’t be able to drive until you get a new insurance policy.

Unique car insurance cancellation laws by state

Knowing your state’s specific laws around car insurance cancellation can be helpful in navigating the process if it ever affects you. Here are some states that have particularly distinct and unique laws.

State Cancellation law
Alabama In Alabama, if you don’t disclose accidents or traffic violations from the last 36 months, you can be dropped from your car insurance.
Arizona If you’re an employee of the car insurance company that’s providing you with car insurance and you’re terminated, you can be dropped from insurance.
California If you lie about the number of miles you drove in the previous year, your insurance can be canceled.
Delaware If your car has not been inspected or it fails inspection, you can be dropped from insurance.
Idaho If you’ve been ticketed for racing, you can be dropped from coverage.
Illinois If the car is defective in any way, you can be dropped from coverage.
Massachusetts If your insurance company is electing to reduce their total number of policies, you can be dropped from coverage.
North Carolina If your specific insurance agent is terminated by the insurance company, the company can drop you from coverage.
Texas If a driver who lives with you, or uses your vehicle frequently, has their license suspended or revoked, you can be dropped from coverage.
Tennessee If you alter your car in a way that can increase risk, your insurance company can drop you.
Virginia If you notify your insurance company that your legal residence is in another state, they can drop you from their coverage.
Washington D.C. If you transfer ownership of your car to another person who is not your beneficiary, your insurance company can drop you.
West Virginia If your license has been suspended for refusing a chemical test for intoxication, your insurance company can drop you.

Consequences of being dropped from car insurance

Getting dropped from your car insurance has implications that can go beyond the hassle of reapplying for coverage. Some obvious and little-known consequences of getting dropped from your car insurance include: 

  • Inability to drive: Driving without insurance is illegal. Therefore, if you’re dropped from insurance, you won’t be able to get behind the wheel until you’re covered again. 
  • Higher insurance rates: When you reapply for coverage, the insurance company will likely see a lapse in your coverage. You’ll see higher rates as a result. 
  • Possible repossession of vehicle: Vehicle lenders will expect you to be fully insured throughout the loan. If you’re dropped from coverage, it can possibly lead to your car being repossessed. 
  • Possible drop in your credit score: If you’re dropped from coverage because of failure to pay your premium, your insurance company can report you to a credit bureau, resulting in a hit to your credit score. Getting dropped from coverage doesn’t guarantee a hit to your credit, and would only happen if your insurance company elects to involve a credit bureau. Poor credit can additionally increase insurance rates.

What to do if you're dropped from car insurance

It’s easy to panic after you get dropped from your car insurance. However, it’s important to remember that getting dropped isn’t the end all be all — and there are ways to get coverage back quickly. Here’s what to do if you receive a letter of cancellation for car insurance.

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 1. Reach out to your insurance company 

When you get dropped from your car insurance, you’ll typically receive a notice of cancellation in the form of a letter — and you won’t actually speak to your insurance agent. As a result, it’s important to immediately get in touch with your insurance company by phone to get clarity on why you’re receiving the letter. 

As evidenced by the cancellation laws by state, there are a variety of reasons that car insurance can be canceled — some of which are out of the hands of the policyholder. Additionally, in situations where your insurance is canceled due to non-payment, you can sometimes get your insurance reinstated as long as you pay the balance you owe. Before you launch into applying for new insurance, reach out to the insurance company to see if you can reach a resolution. 

In some cases, you can pay the amount you owe to quickly reinstate your coverage. Companies will often give you a notice and a grace period to catch up on missed payments before your coverage technically lapses. If you miss the grace period and your coverage lapses, it can become much more difficult to reinstate your policy. 

2. Apply for new insurance

In instances where you can’t get your policy reinstated, you’ll want to apply for a new policy as quickly as you can — the urgency being that it’s illegal to drive without car insurance. Under no circumstance should you drive after being dropped from insurance; therefore, applying for new insurance quickly will limit the time you are forced to stay off the road. 

3. Shop for different quotes

While there should be an urgency to getting new insurance and getting back on the road, it shouldn’t come at the cost of settling for your first quote. 

Shopping for insurance can be tricky after getting dropped from previous coverage. You’ll likely face higher premiums, as insurance companies will view you as a higher-risk driver. To get the best possible rate for your specific situation, it’s critical to shop around for different insurance quotes to make sure you’re not spending more than you have to.

Cancellation vs. non-renewal

It’s important to know the distinction between cancellation and non-renewal, as the two can occur for different reasons and have different time frames. Cancellation occurs when a car insurance company cancels your policy in the middle of the term. Non-renewal, on the other hand, occurs when the insurance company notifies you that they will not be renewing your policy at the end of the term.

The reasons for cancellation and non-renewal tend to be slightly different. A cancellation typically occurs if:

  • You were involved in too many at-fault accidents.
  • You were convicted of a felony. 
  • You fail to tell your insurance company you’re driving for a rideshare company.
  • You have a medical condition that increases your risk. 

Non-renewals, on the other hand, tend to occur if 

  • You put fraudulent information on your car insurance application. 
  • You were consistently late on payments. 
  • Your car insurance company cuts back on the number of policies in your state or stops doing business in your state altogether. 

Frequently asked questions

Insurance cancellations are tricky to navigate and largely depend on what state you live in and what company you use. However, some common questions that tend to arise surrounding canceled policies include:

How long does an insurer have to cancel a policy? 

This differs from state to state, but insurance companies usually give around a 30-days notice prior to canceling a policy. In some cases, it can be more than this — ranging up to 90 days. 

Can car insurance be canceled without notice? 

In the majority of states, a car insurance company must give a written notice 30 days prior to cancellation. However, it’s important to check your state laws to ensure this timeframe applies to you.

What if I can’t afford my car insurance payments? 

If you can’t afford your car insurance payment, you should try to get in touch with your insurance company as soon as you possibly can to let them know you won’t be able to pay. 

If you haven’t missed a payment yet, your insurance provider will likely work with you to delay payments or offer discounts. However, it’s critical that you give your company advance notice if you think you’ll miss a payment 

Does getting dropped from your car insurance affect your credit score? 

As we mentioned earlier, there is no direct correlation between being dropped from your coverage and seeing a decline in your credit score. However, if you fail to pay premiums, your car insurance company can report you to a credit bureau, leading to a drop in your credit score. 

Is it hard to get car insurance after it gets canceled?

Getting car insurance after being canceled from previous coverage can be difficult because you may face higher premiums. As a result, it can be harder to afford monthly premiums due to higher costs. 

Since you’re likely to see higher costs when you look for new insurance, it’s even more important to shop around and compare different car insurance quotes. Starting the process of reapplying for coverage and comparing quotes is imperative for getting back on the road fast.

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Sourcing

  1. Forbes

  2. Investopedia

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