Car insurance cancellation laws can be confusing, even if this isn’t your first policy. If you want to learn more about the ins and outs of this complicated subject, keep reading. We will answer your questions in a way that makes sense.
What Are Car Insurance Cancellation Laws?
Car Insurance cancellation laws govern policy providers and safeguard consumers. Companies must follow these state-mandated regulations when terminating a policy before its expiration date. Every state in America — except New Hampshire — requires drivers to have some form of automobile insurance, typically liability coverage. Your contract explains everything from your limits to the carrier’s cancellation procedures.
The most common terms for auto insurance policies are six and 12 months. You can choose not to renew or purchase a new policy elsewhere when the period is up. Nevertheless, there will be occasions when you or your provider decides to part ways before that termination date.
Common Reasons for Car Insurance Cancellation
A cancellation notice from your insurance company could put your daily drive in park. However, rest easy knowing that a provider can only terminate your policy for specific reasons. Your policy’s first 30 to 60 days is considered the binding period. During this phase, your insurance company investigates the details of your application to ensure it’s accurate and that its agent quoted you the correct rate.
Depending on your state’s laws, your insurer is free to cancel your state minimum coverage at will if it decides you’re a risk. Even a medical condition could be grounds for revocation, as can your vehicle’s overall condition. If it’s considered a public menace, your clunker’s mechanical problems could be why you lost your policy.
Other factors come into play as well. For example, Illinois won’t cancel your insurance if you don’t renew its registration, while Texas will. Fortunately, agents have to give you an explanation if your motor vehicle record affected their decision to revoke your coverage. Some other common reasons your car insurance could get canceled are:
- Missing premium payments
- Maintaining a low credit score
- Having your driver’s license suspended or revoked
- Committing material misrepresentation or forgery
- Forgetting to keep your vehicle registered
- Falsifying an insurance application
- Filing fraudulent claims
- Receiving a criminal conviction
- Driving for hire
- Failing a state-required inspection
- Moving out of the company’s jurisdiction
Which States Have Car Insurance Cancellation Laws?
There are a dozen states that have car insurance cancellation laws. These regulations govern how coverage providers can operate within the region’s boundaries. In addition, many agencies have restrictions above and beyond the most common causes mentioned above. For example, California allows insurers to terminate policies based on annual miles driven in prior years.
If you have a felony record in Georgia or commit certain crimes in North Carolina, you may lose your auto coverage. Drivers with a history of epilepsy or heart attacks in Illinois may be subject to car insurance cancellation laws, while other states stick with the most customary statutes. like non-payment and driving convictions, including:
- New Jersey
- New York
When Can a Policyholder Cancel Their Car Insurance?
There may be an occasion when you need to cancel your policy. Car insurance cancellation laws don’t apply to consumers. If you sell your car, move to another state, or simply find coverage that costs less with another company, you have the right to terminate your coverage.
Depending on your auto policy provider, you can cancel your car’s coverage over the phone, in person, by mail, and via fax. You can even ask your new agent to do it for you in most cases. Remember to follow all the necessary procedures to ensure you don’t have a lapse in coverage or find yourself paying for more than one policy.
Car insurance laws don’t prohibit you from changing your protection limit levels, either. You can modify your coverage at any time. However, laws do not prohibit insurer providers from charging you a penalty fee if you do choose to cancel before your policy’s expiration date.
How to Avoid the Car Insurance Cancellation Process
Canceling your car insurance can be a stressful experience. Whether it’s the inconvenience of calling around for a new quote or the added expense of setting up another policy, this is a situation you want to bypass. Your auto insurers will notify you and your state’s department of motor vehicles in writing that they terminated your coverage. Driving without car insurance is illegal in almost every state, and if you get pulled over by law enforcement, you could face penalties and even jail time.
If you cause an accident while driving without insurance, you could be left holding the bill for medical expenses and damages. Even if you’re lucky enough to evade a collision, this situation can still affect your budget’s bottom line. Earning a “risky” customer rating with a cancellation on your record is a factor that often leads to higher rates, even for good drivers.
Reinstating a Canceled Car Insurance Policy
It may be possible to reinstate your canceled car insurance policy. Your company’s agent will look at factors such as when you made your last payment, if you’ve had a lapse before, and how long you’ve been the company’s customer. Try communicating with your agent. Depending on the issue, there may be ways to work things out, such as prepayment options. Many providers offer ways for customers to keep their policies, including extended grace periods and flexible payment plans.
Drivers in California and Massachusetts, for example, have up to 20 days after receiving a cancellation notice to provide documentation and pay any difference in premium to remain insured. Unfortunately, Texas residents only have 10 days, so always contact your insurer if you’re having trouble paying — before it cancels you.
If car insurance cancellation laws have put the brakes on your commute, relax. Now that you understand the basics, you can keep your wheels covered and on the road. Of course, if you think your carrier ended your coverage unfairly, contact your state insurance department for help. Representatives will interpret your area’s regulations and help you file a complaint.
At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.