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UPDATED: Mar 13, 2020
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It’s natural to feel instant panic when you open your mail to discover that your car insurance has been canceled. Even a small lapse of a few days can leave you exposed to uninsured losses.
If you have a flexible enough schedule to stop driving, you don’t have to worry about losses, but you do still have to worry about penalties. Being uninsured can have major consequences.
Fortunately, you can get your canceled insurance back as quick as you lost it in most cases. It’s important to know why your policy was canceled, what happens when you own an uninsured car, and whether or not reinstating your policy is an option.
Once you know this, you can take the actions that you need to take to avoid some major pitfalls.
Start comparison shopping today to make sure you have the right coverage! Enter your zip code into our FREE comparison tool to get started.
Your Rights as an Auto Insurance Consumer
Every state has a Department of Insurance that regulates the industry. This regulatory agency sets the rules, reviews complaints, and takes action when companies don’t operate fairly.
The Consumer Bill of Rights states what insurers can and can’t do. Without this Bill of Rights, a policyholder could easily be taken advantage of.
When can your insurance company cancel your policy?
One of the sections of the Consumer Bill of Rights explains when an insurance company can cancel your insurance. When you first apply for a policy, you receive temporary documents while the policy is being underwritten.
During this phase, the carrier has up to 60 days to review your application. This period is called a binding period.
There is a lot more flexibility during the 60-day binding period then there is throughout the term. Before the policy is issued, the company can cancel your coverage for any reason.
After the policy is fully underwritten and issued, the carrier can only cancel your insurance before the term ends for a few reasons. Some of these reasons include:
- Non-payment of premiums or late payments
- Misrepresentation on your application
- Suspension or revocation of your license
- Disability that leads to an inability to drive
How do you find out your insurance is canceled?
You should always be notified when your insurance is canceled. If your insurer backdates your termination to the beginning of the term. This backdating is called a rescission and only happens if you’ve lied on your application. This scenario is the only time you won’t find out that your coverage cancels in advance.
If your policy is canceled during the term for any other reason, you will get a notice in the mail before the policy is terminated.
In most states, the law says the insurer must give you a written notice explaining why the policy is canceling. The notice should be sent ten days before a non-payment cancellation and 30 days before other types.
Find Out If Something Can Be Done to Stop the Cancellation
If you get your notice before the cancellation is processed, there’s a chance you could stop it before it happens. Find out the reason and see if anything can be done.
If you provide the information the company needs or make the payment that’s due, the policy won’t terminate.
Find Out If You’re Eligible for a Reinstatement
When the coverage cancels, most companies offer you the option to reinstate your coverage if you’ve missed a payment. If the lapse lasts longer than 30 days, you’ll have to have your insurance rewritten. When you reinstate the policy, the coverage will take effect, but you will still have a lapse that you must explain.
What are the penalties for having an insurance lapse?
If you let your coverage cancel, the state may penalize you if the lapse is long enough. The most common penalties include suspension of your registration, suspension of your license, fines, reinstatement fees, and mandatory SR-22 filings.
If you are pulled over for driving without insurance, you also face having a misdemeanor on your record. Take action as fast as you can after a cancellation. If you can get the policy reinstated, that’s the easiest way to solve the problem.
If you can’t, you should start to compare premiums from other providers. To quickly get quotes, use our FREE online quoting tool and see if your current rates are competitive. Enter your zip code to get started!