Introduction
Your car insurance policy is a binding agreement between you and your insurer. While both parties benefit from the deal, as most contracts do, it is a legal relationship that is meant to protect drivers from discretionary decisions. Car insurance companies must provide coverage until the policy’s completion date except in cases of fraud or non-payment of premiums. So, can your car insurance company drop you? Depending on the circumstances, this may be a possibility.
Reasons an Insurance Carrier May Drop You
When an insurance provider has the right to immediately drop you, the insurance contract will spell out the circumstance. Generally, these reasons include extreme violations such as driving while intoxicated or driving without the legal minimum of insurance liability coverage. In most cases, it is the egregious nature of the violation that motivates an insurance company to drop you.
In other instances, such as numerous traffic violations, not only does an insurer have the right to drop you (or refuse to renew the policy) they may be required to do so by their insurance underwriters. Depending on the insurance provider’s policies, you may receive a cancellation notice via mail or email before the policy is terminated.
Cancellation For Non-Payment
If you do not pay your premiums on time, your car insurance company may cancel your policy after issuing a Notice of Non-Payment. Your insurance provider may send a cancellation notice to the address listed on your policy. To reinstate the policy, you must pay all of your overdue amounts at once. Some providers may allow you to pay the past-due balance in installments, but that is determined at the insurance company’s discretion.
Getting Insurance After Being Dropped
If you are dropped from your policy, you may have difficulty obtaining a new policy through the same insurance carrier (or other carriers). Depending on what caused the policy to be terminated, if the violation was serious enough your driving record could prevent you from getting registered or insure for some time.
In some cases, you may be able to get ‘Non-Standard’ coverage. These policies are often more expensive than standard coverage and may not cover all of your risks, but they may provide the coverage options that you need. Additionally, by getting coverage through a non-standard provider may help you slowly re-establish a driving record, and eventually enroll in standard coverage.
Can You Switch Insurance Companies While in a Contract?
Yes. However, there are a few things to consider before you switch providers, such as how the state handles consumers who are in the midst of a contract term. In some states, if you switch car insurance companies in the middle of a contract and move your coverage, you may be held responsible for any unused prorated premiums that are associated with your previous policy.
For example, if you are in a contract that goes from January to July, and you switch to a new provider in April, you might owe your previous insurance provider the prorated amount of the premium from January to April.
Penalties
The penalties for having a policy cancelled vary by state. Generally, insurance companies must provide at least 30-days prior notice before an individual policy can be cancelled. If it is not given, the policy must remain in effect for 30 days after the insurer receives the notification of cancellation.
Many states also charge a fee for reinstating the policy after a cancelled policy. Additionally, some states may impose a fee for pulling new insurance from other carriers too early. If you are dropped from one insurer and need to enroll in another one, it is best to check with your state’s department of insurance to find out if there are any applicable fees.
Can I Be Dropped for Filing Too Many Claims?
Filing multiple car insurance claims within a set period of time is a surefire way to increase your rates, and depending on the insurer’s policies may even cause them to drop you. Insurance companies generally will not drop you simply because you filed a claim. However, repeated claims may be a red flag for insurers, as they may view the policyholder as high-risk. Your insurer may terminate your policy if they consider your behavior a risk they are no longer willing to insure.
Can I Sue My Insurance Company if I am Dropped?
It is unlikely that you can sue your insurance company if they drop you according to their policy. Unless your insurance company acted in bad faith, most judges will side with the insurer’s policy. Therefore, if you are dropped for any of the reasons stated in the contract, it is unlikely that any legal recourse is available to you. The best option is to stay in contact with them and find out if there is a way to be reinstated.
Should You Increase Your Coverage
If you have been dropped from a policy, it is important to know the reasons behind why you were dropped. For example, if you were dropped due to a driving violation, you may want to consider increasing your insurance coverage. This can make you more attractive to potential insurers, as it shows them you are taking potential risks seriously and that you are willing to pay more to protect yourself and your property.
On the other hand, if you were dropped due to a seemingly arbitrary reason, such as financial instability, it may be best to lower your coverage limits and save some money while rebuilding your credit score.
Conclusion
Having your car insurance policy canceled is a hassle, but it is important to check with your state’s department of insurance and read your policy closely to ensure you understand your rights. Additionally, it is important for policyholders to remember that policy renewal is not guaranteed and that companies may have a right to cancel when certain criteria have been met.
