Car insurance cancelled? What to do next!

If your car insurance is cancelled it can be frustrating, confusing, and raise many questions. In this article we discuss common reasons why insurers decide to cancel and non-renew customers. We’ll help you determine what to do (and what not to do!) if you find yourself uninsured.

Top Reasons Your Car Insurance Was Cancelled

If you are dropped by your auto insurance company, the first thing you should do is call your insurer. Your insurance company will be the best source of information on “why” you were dropped. Your insurer’s reason for dropping you will provide you clarity and may help you determine next steps on finding a new policy. In some cases, insurers may even be willing to reinstate your policy (for example, if it was cancelled for non-payment). Generally, there are two ways you can be dropped by your insurer:

  1. Cancellations
  2. Non-Renewals

1. Cancellations

A cancellation occurs when an insurer drops you during your policy period. The most likely reasons for cancellation are major issues such as if you broke the law or otherwise violated terms of your insurance policy. Examples causes of cancellation include committing insurance fraud, having a DUI or other major driving infraction, or simply not paying your insurance provider. As we’ve mentioned, if you think you were cancelled for non-payment (the most common reason for a cancellation), you should always contact your insurer to remedy the issue.

After being cancelled by your auto insurance company you will likely find it more challenging (and expensive) to find a new insurer. Later in this article we explore different ways to find insurance after a cancellation.

2. Non-Renewals

A non-renewal occurs when your policy expires and the insurer decides not to renew your policy. Nearly all reasons for non-renewal are due to the insurer no longer believing they can profit from selling you insurance. Because insurer profitability is determined by many factors, you may not find it more difficult to find new insurance. Several of the most common reasons for nonrenewal are below and which may impact the cost of your next policy.

Getting into Accidents

One of the highest risk factors for insurance companies is if a driver has historically gotten into one (or many!) accidents. If you’ve gotten into multiple accidents you may find that insurance companies are no longer willing to provide you insurance. If you were nonrenewed because of your accident history expect that it may be challenging to find a new insurance company.

Getting Tickets

Similar to getting into an accident, if you have received multiple tickets related to your driving, you may be deemed too risk for a company to insure. Every insurer considers your driving history, so if this is why you were dropped you will likely find it more difficult to get insurance. Insurers want safe – not speeding – drivers!

Financial Distress

Sometimes an insurance company is in such poor financial health that they no longer feel they can insure their customers. When this happens the insurance company may begin non-renewing customers to shrink their balance sheet. When you are non-renewed due to the health of your insurer, you may not have trouble finding new auto insurance.

Change in Laws

Your insurance company may also drop you for reasons completely out of your control. Sometimes states change their laws, making insurance less profitable for insurers. When these regulations are passed, insurers may decide to no longer do business in a state and non-renew all of their customers. A recent example, are Geico, Progressive, and State Farm who are all actively shrinking their California business.

Why doesn’t the insurance company just raise prices instead of dropping me?

Many auto insurance companies develop strategies that focus on specific risk profiles that they are comfortable insuring. Although they may conceivably be able to charge someone enough to offset the higher risk, most insurers will not like introducing the uncertainty or higher risk.

Furthermore, many insurance companies also must abide by state laws restricting their ability to raise the price of their insurance policies. For example, if you get in an accident and your auto insurer believes that they need to double the price of your auto insurance to continue making profit, they may be prevented from doing so by state regulators. So because they cannot raise the rate to an adequate level, they decide that they must stop selling you insurance.

What do I do after being dropped by my auto insurance company?

As we’ve mentioned, the first thing you must do is call your insurance company and try to remedy the issue. Getting dropped by your insurance company can be frustrating, but remember there was a reason for it that you may be able to fix. If you are unable to work with your current insurer you will need to find a new insurance policy.

Don’t drive!

Once your insurance company drops you, you will need to act fast to find a new policy. Without an active policy, you cannot legally drive. While laws vary state by state, common penalties for driving include:

  • Tickets and fines
  • License and registration suspensions
  • Possible jail time

Nearly all states require auto insurance and the penalties of driving without it can be severe.

What if no one will sell me insurance?

If an insurer dropped you because you broke the law or got into too many accidents, you may find no insurers willing to sell you insurance. When this happens, you will need to consider buying from your state’s assigned risk pool. These programs are typically the highest cost for drivers – and so should not generally be used – but do provide a last resort option if other insurance options can’t be found.

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