Have you ever been in a fender bender or at a routine traffic stop, and suddenly, you can’t remember where your insurance ID card is or when the last time you made your auto insurance payment was? That feeling happens to all of us, even if we have never missed a payment. Car insurance is also known as proof of financial responsibility, and it is our responsibility as licensed drivers to maintain continuous coverage or risk facing expensive consequences. Bankrate’s insurance editorial team put together this guide on what to do if your car insurance is canceled, how to reinstate it and some tips on avoiding a lapse in the first place.
Can car insurance companies drop you?
Car insurance companies can cancel or “drop” your coverage, although you will typically have enough notice to obtain a new policy and avoid a lapse in coverage. Every state and Washington, D.C. has different regulations in terms of how much advance notice is required for a policy cancellation — it ranges from 10 to 60 days.
In most situations, your car insurance company will mail a physical notice of cancellation to you with the last date of coverage, the reason behind the cancellation and any action you can take to avoid cancellation, if there is one. If you are enrolled in a paperless program, you will usually still get a physical letter and an email or text.
The most common reasons why auto policies are canceled are if:
If your policy has been in force for fewer than 60 days, there may be more scenarios that could lead to cancellation.
What to do before you miss a car insurance payment
Most drivers don’t let their car insurance policies lapse intentionally, but mistakes happen. Since many carriers view having a lapse of car insurance coverage as risky behavior, your premium might increase once you get the policy up and going again. Here are some of the most effective ways to avoid a nonpayment cancellation:
- Pay your policy in full at each renewal: While this option isn’t affordable for everyone, paying your entire premium each renewal means you only have to remember to pay your policy once or twice a year, and you can usually avoid paying service fees.
- Enroll your policy into an automatic payment plan: Most carriers offer autopay for various payment plans, which works well for customers who like to “set it and forget it.”
- Set up automatic bill payments with your bank: Policyholders who feel uncomfortable giving their banking information to a third party may be able to enroll in bill-payer plans. With this option, the bank sends money to your carrier directly rather than your carrier requesting the payment automatically.
- Set up reminders on your phone or email calendar: Whether your policy is enrolled in automatic payments or you make the payments independently, setting up a reminder can help you remember when the payment is due and ensure that the funds are available.
Policyholders looking for creative ways to save money should check with their insurance agent about what payment plans offer saving opportunities. Aside from paid-in-full discounts, carriers tend to offer discounts for policies set up on automatic pay through a bank account instead of a debit or credit card. Additionally, you might be able to save even more if you enroll in paperless billing and policy plans.
What is the difference between a policy cancellation and a nonrenewal?
There are two types of policy cancellations, and understanding the difference between the two can help you know what course of action you should take. Insurance contracts usually come up for renewal every six or 12 months. A policy nonrenewal means that your insurance company has decided against offering coverage for your next policy term. If this happens, your insurer will notify you before the renewal, giving you time to shop for new coverage. The car insurance cancellation laws vary between states, but policyholders usually receive notification of the nonrenewal between 30 and 60 days before the policy expires.
Here are a few reasons an insurance carrier might initiate a policy nonrenewal:
- The policy no longer meets your carrier underwriting criteria
- You have accumulated too many surcharge points from accidents or moving violations
- The company has decided to discontinue offering coverage in your area
On the other hand, an insurance cancellation means that your policy is canceled at any time other than the renewal date. Cancellations can only happen for very specific reasons. Once you purchase a policy, the insurance company usually has 60 days to decide not to offer you long-term coverage by issuing a cancellation. After that, there are typically only three reasons an insurance policy can be canceled:
- You have not paid your premiums, causing a lapse in coverage
- You committed fraud or lied on your insurance application
- An event occurred that causes your policy to no longer meet your carrier’s underwriting criteria, such as a DUI conviction
In the table below, Bankrate’s insurance editorial team has outlined the key differences between policy cancellations and nonrenewals:
| Cancellation | Nonrenewal | |
|---|---|---|
| Time frame | Within the first 60 days of coverage or for a specific reason | At the end of your policy term |
| Notice required | Depends on the reason for cancellation | Depends on the state; usually 30 to 60 days |
| Reason for termination | Usually related to fraud, material misrepresentation or nonpayment | A variety of potential reasons, including number of claims filed, vehicle or driver no longer meeting the carrier’s requirements or the carrier coverage area change |
What can you do after your auto insurance is canceled?
If you have received an auto insurance cancellation letter, first determine what type of cancellation it is, and how long you have to find replacement coverage. No matter the reason behind the cancellation, you will want to make sure to secure coverage before you have a lapse in insurance.
If your car insurance coverage is dropped, you may want to try the following steps:
- See if your provider is willing to consider reinstating your coverage. “If you can work it out with the insurance company to be reinstated, that’s usually the first step most people want to take,” advises Amy Bach, executive director of United Policyholders, an insurance consumer group in San Francisco. Contact your insurance provider, determine the reason for the cancellation and ask if the coverage can be reinstated easily. Sometimes something as simple as taking care of a late payment can get your coverage back on track.
- Contact your state’s insurance commissioner for an appeal. Your state may be able to help. For example, in Illinois you could seek the help of the Department of Insurance, which holds hearings for insurance appeals. This may be helpful if your policy is being canceled or nonrenewed due to a situation that has been remedied, such as removing an ineligible vehicle from your policy.
- Look for a new insurance provider. If the insurance company declines to keep your policy, you may want to begin searching for a new insurance provider by gathering quotes from several carriers. This is why it is important to know when your policy is going to end, so you can get coverage before you have a lapse.
Can you fight a car insurance policy cancellation?
Depending on the reason for your cancellation, you may be able to reach an agreement with your carrier. For example, a policy cancellation related to nonpayment usually gives you time to make the payment before the cancellation goes into effect. You may be able to work out a payment arrangement with your carrier to keep the policy active. However, if the car insurance is canceled due to driving activity, you may need to look for another carrier specializing in high-risk drivers.
Also, you may want to contact your state insurance department to file a complaint if you believe your policy has been canceled unfairly. Depending on the state, you may be protected from cancellation for specific reasons, such as your age. The state insurance department might investigate to see if the cancellation was justified. Most states do have an appeal process for a policy cancellation.
Will it be more difficult to get insurance if you get dropped?
Unfortunately, if your car insurance company drops your coverage, getting another policy could be difficult or more expensive, depending on the reason for your cancellation. The reasons that often lead to the cancellation, such as a license suspension and driving activity, may be viewed by other insurance companies as evidence of high-risk behavior, which generally leads to higher costs of car insurance.
However, some companies offer high-risk auto insurance, so a policy cancellation as a result of a driving incident does not necessarily mean you will not be able to find replacement coverage. Although your premium may be higher if you have accidents, tickets or a DUI conviction, you will likely still be able to find some form of coverage to meet state minimum requirements.
If you are unable to line up a new policy with another insurance company, you may be able to get coverage through your state’s “assigned risk” program. This type of auto insurance is typically available to high-risk drivers who have trouble buying a policy in the private market.
Penalties for driving without insurance
There are various possible penalties for driving uninsured, even if you don’t cause an accident or have a moving violation:
- Higher insurance rates: Many carriers charge higher rates to drivers with a recent lapse in car insurance. On average, drivers with an insurance lapse pay $2,606 annually for full coverage car insurance — 11 percent more than the national average rate without a lapse.
- State fees for being uninsured: States with automatic reporting are notified by the insurance company when a policyholder cancels their policy. If the license plates for the vehicle haven’t been turned back to the state, a heavy fine may be imposed along with license and registration suspensions. For example, in New York, drivers are fined $8 per day while driving uninsured. After 30 days, the fine goes up to $10 per day, then $12 per day after 60 days.
- Possible towing and impound fees: Drivers who park their vehicles on public roads have the added concern of being towed and impounded due to a lack of car insurance. You must pay for car insurance coverage first, then any impound fees to get the vehicle back. Usually, you can pay for tickets related to any parking violations at a later date.
- Financial risk of causing an accident while uninsured: Even if you are unaware that your policy has been canceled, you are still financially responsible for any accident you cause. Without an active auto insurance policy, you would have to pay for any bodily injury or property damage you cause out-of-pocket.
Frequently asked questions
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The best car insurance likely depends on your financial situation, where you live, your driving history and your preferences. If you have been dropped from coverage and you are looking for a new policy, you may want to get quotes from several companies to find an option that fits your needs. However, be aware that if you are being dropped from your current carrier for high-risk driving behaviors, it is likely that you will face higher premiums with other carriers as well.
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Technically, yes you can cancel your auto insurance policy at any time, but some carriers may charge fees for policies canceled before the end of the policy term. Additionally, insurance experts advise that you should only cancel a policy if you have canceled your registration at your state’s department of motor vehicles or if you purchased a policy with another company that will become effective on or before the cancellation day. If you choose to cancel your policy and drive without insurance, you could be violating state laws and risk a variety of penalties that range from costly fines to driver’s license and vehicle registration suspension.
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Yes, you will likely be able to find coverage again if your carrier dropped your policy. When doing so, it’s important not to intentionally hide your canceled coverage status from your new insurer. Misrepresenting an insurance application can lead to having your policy canceled all over again. If you are unable to find auto insurance coverage from a private carrier, you may need to reach out to your state’s department of insurance to discuss your options for coverage, such as assigned risk pools.
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A no-loss statement is an agreement that an insurance provider may have you sign to validate that your vehicle has not undergone any damage or loss that could lead to you filing a claim on that vehicle between the point your policy was canceled and the point you petition for reinstatement.
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How long it takes for an insurance policy to be canceled for non-payment depends on the company and its billing policy. Car insurance companies must notify you prior to canceling the policy. Each state has different notice periods, but it is typically at least 10 and as much as 20 days. You usually have a grace period before the notice goes out, so if you realize you’ve missed a payment, be sure to make it as soon as possible to avoid being canceled for non-payment.
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