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UPDATED: Mar 13, 2020
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Auto insurance positively helps people trying to maintain personal net worth while avoiding debt. A major liability judgment against someone could break the individual’s back financially. Auto liability insurance, amazingly, may cover the losses incurred even by someone outrageously at fault for an accident.
All the negligent person has to do is meet all the terms and requirements associated with purchasing a policy. Unfortunately, no right exists that states auto insurance companies are obligated to cover someone.
In fact, an auto insurance company may exercise an option to drop or cancel coverage; in doing so, the insurance company voids all insurance protection from the end date of coverage or the date of cancellation.
Cancellations do not occur in an arbitrary manner or without just cause. Unless an insurance company goes bankrupt, responsible customers won’t wake up one day to discover coverage has disappeared.
A responsible auto insurance customer likely wishes to avoid any surprises. A general understanding of the circumstances in which an insurance company removes coverage eliminates confusion.
If you are in need of auto insurance, enter your ZIP code above and compare at least three to four policies today!
“Dropping a customer” is a colloquial expression. Officially, a policy is not dropped. Rather, the contract experiences a cancellation, or the provider won’t renew the contract at the end of the term.
A cancellation usually involves grave matters including:
- Lying on an insurance application
- Filing a fraudulent claim
- Being convicted of a driving-related crime
- Having driving privileges suspended or revoked
- Developing a severe health condition
In certain situations, the canceled insurance policy may be reinstated. For example, once suspended driving privileges are restored, the driver could seek out new coverage. Or, if the driver’s policy was canceled due to vision problems and the problems are corrected, they might not have trouble purchasing new insurance.
Now, the original insurance provider might not want the customer back if they represent too much of a risk. Comparison shopping for high-risk insurance may be necessary. Seeking new insurance won’t take too much effort since quotes can be found online.
Cancellation Due to Non-Payment
For insurance to remain active, the policyholder must pay the premiums. Commonly, policies are issued in six-month terms. Paying all six months in advance each time a bill comes due eliminates problems with non-payment.
Those unable to afford six months at one time and opt for monthly payments positively must not miss a due date. Setting up an automatic credit card, debit card, or bank withdrawal payments cuts down on the chances of missing a payment.
Many insurance companies provide a grace period and send out reminders when a payment is missed. Certain providers lack such a policy and cancel immediately.
It’s the insured’s responsibility to stay on top of payments and insurance company rules. Hopefully, if the policy gets canceled due to non-payment, making a payment can lead to a new policy being issued without any delays.
Once a policy suffers cancellation, all the protections associated with the plan disappear. Continuing to drive after a policy’s cancellation means driving without insurance, which can be a crime in certain jurisdictions.
At the very least, a severe fee would be imposed on someone who drives without insurance.
Old documents related to the policy mean nothing. A proof of insurance card issued before the cancellation won’t suffice.
Showing such “proof” to a police officer and making a false statement when knowing the insurance was canceled could be a serious violation of the law. Legal jeopardy may follow. Additionally, creating more driving-related legal woes makes finding new insurance even harder.
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Non-renewal may not be as harsh and immediate as a cancellation, but one thing doesn’t change: you don’t have insurance. One positive point exists with non-renewals.
The policyholder can possibly prevent the causes leading to non-renewal, such as:
Filing Too Many Claims
Those continually filing claims year after year might be a bit too much trouble for an insurance company. In essence, filing several collision claims could indicate the driver simply doesn’t care about getting into an accident.
Perhaps the next accident might be a disastrous and costly one.
Paying Late Too Often
Insurance companies might grow tired of someone who cannot pay bills on time. Even when the payment arrives within a grace period, a late payment won’t go unnoticed.
Late payments may create clerical and administrative burdens. If enough burdens are imposed, the insurance company may choose to part ways with the customer.
A Driving Record Worsens
When a driver receives a traffic citation, points accumulate on a driving record. The insurance company gets copies of that record.
Usually, points mean insurance rates go up; too many points, however, could lead an insurance company to drop the driver.
Causing an Accident
A driver who causes an accident might be totally financially protected by their auto liability coverage. While the driver feels relief about the insurance company paying for the loss, the company may be less than thrilled.
Too many small accidents or one big accident may be enough for the insurance provider to choose to part ways.
All of the above scenarios can be addressed by being a more careful and responsible insurance customer. Do not become lax with good driving or financial habits. Otherwise, an insurance company may tire of such behavior.
Not being renewed or suffering a cancellation doesn’t necessarily mean it’s the endgame for buying insurance. Nor is high-risk insurance automatically the only option available.
Diligent online comparison shopping may uncover a new policy that provides a reliable level of financial protection.
Start comparison shopping today for better auto insurance by entering your ZIP code below!