Why Did I Get a Car Insurance Cancellation Letter?
Auto insurance coverage is not a luxury—it is a necessity. Except for New Hampshire and Virginia, drivers are required to carry auto insurance in every U.S. state. If you get caught driving without it, the penalties can be severe, including hefty fines, impoundment, and even the possibility of jail time.
Those consequences can make it terrifying to get a letter from your insurer that says your policy is being canceled. Before you get overwhelmed with panic, it's a good idea to understand just what cancellation means, and how you can deal with it. Here's what it means—and what to do—when you receive an insurance cancellation letter.
Why Your Policy Is Being Canceled
It's pretty unusual for an insurer to cancel one of its policies. Insurance companies can cancel policies at-will within the first 60 days that the policy is in force, but after that, the rules get much more strict. For the most part, your policy can only get canceled after the initial 60 days if:
- You missed premium payments
- You committed fraud or misrepresented yourself during the application process
- Your license has been canceled, suspended, or revoked
While those are the three main reasons that an auto policy can be canceled, some additional special circumstances can apply to certain drivers in certain areas. For instance, in Illinois, a policy can be canceled if the driver is diagnosed with epilepsy unless that driver's doctor can assure the insurance company that the condition won't affect driving.
Cancellation vs. Nonrenewal
One important distinction to make is the difference between a cancellation and a nonrenewal.
Cancellation happens during the policy period. It's an extreme step for an insurance company to take, and that's why there are legal restrictions on why a policy can be canceled.
Nonrenewal, on the other hand, happens at the end of one policy period and before a new policy period begins. Since the change happens between policy periods, the rules concerning nonrenewal are less strict than policy cancellation. A nonrenewal decision could have nothing to do with you or your driving, such as when an insurance company decides to drop coverage for an entire area. If you live in the area where coverage is being dropped, your policy won't be renewed, and you'll have to find a new carrier.
Many reasons for nonrenewal do concern your driving. A DUI conviction, the accumulation of moving violations, and multiple claims against the policy could all weigh into an insurer's decision of whether or not to renew your policy.
Your insurer is required to inform you of its intention not to renew your policy, as well as the reasons why it has chosen not to renew it. The timeline—how much advance warning your insurer is required to give—depends on where you live.
What to Do If You Receive a Cancellation Warning
A cancellation letter shouldn't come out of the blue. The reasons a policy can be canceled are fairly extreme circumstances, so they won't happen without your notice. Drivers should have a pretty good idea of why their policy is being canceled before they even open the insurer's letter. Chances are, the insurance company has already reached out and given the driver plenty of time to correct the issue.
For example, if you are behind on your premium payments, insurers will almost always provide you with a grace period to catch up. Or, if your license has been revoked, you can work to restore your license before the policy is canceled. Sometimes you won't be able to correct the issue, but it's worth exploring your options.
Reach out to an insurance agent if you aren't sure why your policy is being canceled, or you want to better understand what you can do to keep it.
The Bottom Line
Whether you can correct missteps to keep your current policy, or you decide you need to find another insurer, you need to act quickly. Driving without coverage can be devastating. Not only will you be financially responsible for any damages that occur during a crash, but you'll also face legal penalties in many states. Insurance companies are required to notify states when a policy has been canceled, and state authorities may revoke your car's tags or otherwise stop you from driving.
It's also important to quickly restore coverage because lengthy gaps in auto insurance coverage result in higher premiums.
Virginia Department of Motor Vehicles. "Insurance Requirements." Accessed May 21, 2020.
State of New Hampshire Insurance Department. "Your Guide to Understanding Auto Insurance in the Granite State," Page 1. Accessed May 21, 2020.
Consumer Federation of America. "Penalties for Driving Without Insurance by State." Accessed May 21, 2020.
Insurance Information Institute. "What's the Difference Between Auto Policy Cancellation and Nonrenewal?" Accessed May 21, 2020.
Esurance. "Why Car Insurance Policies Are Canceled." Accessed May 21, 2020.