Car Insurance Companies Dropping Coverage

Find out About Being Non-Renewed Over Filing Too Many Claims

••• Getty Images

Getting into an automobile accident can be a nerve rattler, to say the least. However, getting into a second or third accident within a short period can ratchet up those stress levels quicker than… well, let’s just say really, really quickly. One reason for this is that people begin to worry about how multiple claims will affect their auto insurance. They are afraid that their rates will skyrocket or that their policy might even be canceled. Which brings us to this question: How many claims can I file with my insurance company before they cancel my policy?

Cancellation vs. Non-Renewal

The good news is that it is highly unlikely that your insurance company will cancel your policy because of multiple claims. The bad news is that multiple claims may cause your insurer to raise your rates or decide to not renew your policy at the end of your current policy period. So, the first order of business is to be clear on the difference between cancellation and non-renewal.

Cancellation

Cancellation refers to the termination of your insurance before the end of the policy period. If your insurance company is going to cancel your policy, it will likely do so within the first 60 days of the policy period due to some form of misrepresentation or false information that was given by you on your application. The most likely reasons for your insurer to cancel your policy after 60 days are non-compliance with the terms of your policy or non-payment of your premium. Filing several claims, however, will not result in the cancellation of your policy, as long as the claims are not fraudulent.

If you have lied on your insurance application or have filed a fraudulent claim, you can almost guarantee that your insurance company will find out -- and that they will cancel your coverage as a result.

Non-Renewal

As you might expect, non-renewal refers to being dropped by your insurer at the end of your current policy period. There are many reasons why you might be dropped. In fact, in most cases, you can be dropped for any reason except for your age, race, gender, color, marital status, occupation, or physical handicap, all of which are considered discriminatory reasons and are protected by law. Remember, however, that insurance companies are in the business of signing and keeping clients, and will usually only drop you if they determine that you are a “high-risk” driver.

If you are in the habit of engaging in the risky driving behavior, such as frequently speeding or drinking under the influence of alcohol or drugs, then you can probably anticipate a non-renewal in your future. If you’re a relatively safe driver who has simply had the bad fortune of having a couple of fender benders in the last couple of years, then you are probably safe.

Reasons for Non-Renewal

Typical reasons for an insurer to drop you include:

Bad Driving Record

Insurance companies pay attention to your driving record. If you accumulate a high number of traffic violations over a short period, your insurer may decide that you are too great a risk and drop you as a client.

DUI or DWI

Drivers with a DUI or DWI conviction are always considered a greater risk. This is a big reason for non-renewal.

Delinquent Premium Payments

Fraudulent Claims

These last two categories were discussed above. If they are good enough to cancel your policy, they’re good enough for non-renewal.

Too Many At-Fault Accidents

If you’ve been involved in more than two accidents within a three-year period for which you are liable, you may be dropped.

Too Many Claims

This is the one we’re most interested in here. Your insurance carrier may consider dropping you simply because you file too many claims regardless of severity or fault. The simple truth is that insurers are in the business to make money and if they have to pay out more to you than they are bringing in from your premiums, they will probably drop you from their rolls. So, how many claims are too many?

The Magic Number

I was hoping you’d forgotten that because the answer is: it depends. On the insurance company, on the types of accidents, even on the state where you live. When an insurance company decides to renew or not renew a policy, they are going to consider several factors, one of which is the number of claims the client has made. Many preferred insurance carriers will non-renew a car insurance policy if two at-fault claims are filed within a three-year period. Really the best answer I can give you is the fewer claims you make, the better; the more claims, the worse.

Ways to Avoid Being Dropped

There are several things that you can do to maintain a “low risk” status and reduce the chances of your insurance coverage being canceled or not renewed:

Drive Safely

This one is obvious. Don’t drink and drive. Follow the traffic laws. If you drive safely, you are much less likely to get into an accident or receive a ticket.

Pay on Time

Don’t get behind in your premium payments.

Don’t Lie

Make sure to always be truthful in your dealings with your insurance company and, above all, don’t file a fraudulent claim.

Don’t Make a Claim

If you have been in a small accident or incurred some other minor damage to your vehicle, you might want to consider paying for the repair out-of-pocket and leaving your insurer out of it. I know that this can be rather frustrating. I mean, isn’t that why you have insurance? But the bottom line is that paying for the repair yourself may keep you from being dropped or, at the very least, having your premium increased.

One final thing. Remember that auto insurance laws vary significantly from state to state. If you have been dropped by your insurer, or are afraid that you are about to be, make sure to check the laws regarding cancellation and nonrenewal in your jurisdiction.