Cancellation Vs. Renewal: All the Facts

Cancellation and non-renewal are two very difficult actions for a policyholder. The repercussions of having your policy cancelled can be particularly rough, as it can tarnish your credit and make it a tricky and costly effort to find new coverage. Non-renewal, while less restrictive, is generally a punishment that is best avoided.

There are several reasons, usually covered in detail by your state legislation, that your policy can be cancelled. The first and foremost is if you or someone in your household has their drivers license suspended, revoked, or if the license simply expires, during the policy period. Failing to pay your premium in a timely manner is also grounds for cancellation.

If you have not provided accurate information about your risk as the insured, the company also has the right to cancel your policy. This means any missed or misrepresented information about your vehicle, your driving history, your previous insurance history (your claims history), even how many people have access to drive your car. The period after your apply for a policy while the company assesses your risk is called the binding period. During this period, which is generally 60 days, the insurance provider can cancel your policy if it finds blemishes on your driving record, misrepresented information, any information that brings them to the conclusion that you are a risky applicant.

When your auto insurance company chooses to cancel your policy, they can do so at any time during the policy period. They are required, however to send you a notice indicating the reason that they have decided to cancel your policy. This notice is generally send 10-30 days prior to the effective cancellation date.

If your insurance policy is cancelled because you missed one or multiple payments on your premium, it is possible that the same company will reinsure you, usually for a higher rate, and provided you have an otherwise good record. Other insurance companies may still accept you if your policy was cancelled due to missed payments, however some insurers will require you to pay the full years premium up front.

Once your policy is canceled, if your insurance company is not willing to reinsure you, you must find a new provider for your car insurance. This can be especially difficult, and high-risk insurers generally make you pay for the chance they take in insuring you. Insurance companies often ask prospective clients if they have recently had their policies cancelled by other providers.

Non-renewal is when your insurance company chooses not to renew your policy, which is far less restrictive and damaging than canceling your policy. Unlike cancellation, non-renewal can only happen at the end of a policy term. Some states even have laws that necessitate the policy being applicable for at least a year before the insurance provider can choose to non-renew your policy.

Non-renewal is not intended to make you an outcast from the insurance world. Rather, it is usually simply the decision by your insurance provider that you are too high a risk to cover. While there are no state or federal laws outlining the specific criteria for non-renewal, your insurance company may make this decision based on, say, a DUI conviction, or if you simply have had a large number of claims where you were the at-fault party. While non-renewal generally does not completely impede your ability to find coverage with a different insurer, your rate may be significantly higher.

Your car insurance provider is required to send you notice of non-renewal. Depending on what state you live in, the law requires they notify you usually between 10 and 30 days prior to the non-renewal. While sometimes the notice will indicate the reason that the company has chosen not to renew your policy, it is not obligated to do so. If they do not inform you of the reason your policy was not renewed in the notice, you may send a written request to your insurance provider.

There is nothing good that comes from having your auto insurance cancelled. The blemish on your record can severe impede your ability to find affordable coverage in the future. If, however, your insurance policy is cancelled before the period covered by your last premium payment has ended, you will receive the balance from your provider. If, for example, you make a premium payment for the next sixth months in January, and your insurance is cancelled in March, you are entitled to the money intended to cover the remaining half of the period.

To compare auto insurance rates online, make sure you check out www.getagreatrate.com or www.greatcarinsurancerates.com