How Many Claims Does It Take for an Insurance Company to Drop You?
Why Multiple Claims May Put Your Coverage at Risk
Getting into an automobile accident can be nerve-wracking, to say the least. Getting into a second or third accident within a short period can ratchet up those stress levels really quickly. One reason to worry is the concern over how multiple claims will affect your auto insurance. Will that affect your insurance rate or might the policy even be canceled?
Getting Dropped From Your Insurance
The good news is that it is highly unlikely that your insurance company will cancel your policy outright because of multiple claims. The bad news is that multiple claims may cause your insurer to raise your rates or decide not to renew your policy at the end of your policy period.
So, the first order of business is to be clear on the difference between cancellation and non-renewal.
Cancellation means your insurance company terminates your policy before the end of the policy period. If your insurance company is going to cancel your policy, it will likely do it within the first 60 days. Insurance companies will cancel at this time if you misrepresented yourself or gave false information 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. But if you lied on your insurance application or 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 refers to being dropped by your insurer at the end of your policy period. There are many reasons why your insurance company might not renew your policy, including filing too many claims. 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.
Reasons for Non-Renewal
Insurance companies are in the business of signing and keeping clients, and won't usually drop you for just one accident. But if they determine that you are a “high-risk” driver, one who is frequently caught speeding or driving recklessly, then you can probably anticipate a non-renewal of your policy. You're just not a good bet for them to insure.
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.
Here are a few typical reasons for an insurer to drop you.
Bad Driving Record
Insurance companies pay attention to your driving record. If you receive a high number of traffic violations in a short time, your insurer may decide that you are too great a risk and drop you.
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 and Fraudulent Claims
As mentioned, insurers will non-renew or cancel your policy if you don't make the payments or if you file fraudulent claims.
Too Many At-Fault Accidents
If you’ve been involved in three or more accidents within a three-year period for which you are liable, you may be dropped.
Too Many Claims
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 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.
How Many Claims Is Too Many?
The answer is: It depends. It can vary by the insurance company, by type of accident, even by state. When an insurance company decides to renew or non-renew a policy, it considers several factors, one of which is the number of claims the client has made.
Many insurance carriers will non-renew a car insurance policy if there are three or more at-fault claims are filed within a three-year period. It's best to remember: the fewer the claims, the better.
Ways You Can 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 non-renewed.
This one is obvious. Don’t drink and drive, and follow all 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.
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. This can be a frustrating point: Aren't repairs supposed to be covered by insurance? 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 note: 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, check the laws regarding cancellation and nonrenewal in your jurisdiction.
Insurance Information Institute. "What's the Difference Between Auto Policy Cancellation and Nonrenewal?" Accessed Nov. 22, 2019.
Capitol Insurance. "FAQ's," Accessed Nov. 22, 2019.
Justia Law. "2016 Arizona Revised Statutes Title 20 - Insurance § 20-1632.01 Cancellation or Nonrenewal for Nonpayment of Premium; Grace Period; Notice of Cancellation; Discrimination; Definition," Accessed Nov. 22, 2019.
State of New Jersey Department of Banking and Insurance. "NJ Automobile Consumer Bill of Rights," Accessed Nov. 22, 2019.
Pennsylvania Insurance Department. "Questions and Answers About Automobile Insurance in Pennsylvania," Accessed Nov. 22, 2019.
Chiumento Dwyer Hertel Grant Attorneys at Law. "Reasons Why Your Auto Insurance Company Can and Can’t Cancel You," Accessed Nov. 22, 2019.