Auto insurance coverage is not only nice to have; in all but a few states, you need to have it. If you get caught driving without it, you could face hefty fines, impoundment, and maybe even jail time.
If you've had a few issues or haven't been making your payments, you might get a letter from your insurer that says your policy is being canceled. Here's what it means (and what you can do) when you receive an insurance cancellation letter.
Why Your Policy Is Being Canceled
It's not likely that an insurer will cancel a policy without good reason. Carriers can cancel policies at will within the first 60 days. After that, they can't unless certain conditions are met. For the most part, it can only be canceled after the first 60 days if:
- You missed paying your monthly payments and have not caught up on them after being notified.
- You lied about yourself during the application process.
- Your license has been canceled, suspended, or revoked for reasons the carrier might not be aware of.
These are the three main reasons that an auto policy can be canceled. In some states, health problems can cause your agency to drop your coverage. For instance, in Illinois, a policy can be dropped if the driver is diagnosed with epilepsy. The driver's doctor would need to submit proof that that the condition wouldn't affect that driver's abilities on the road.
If you have any health issues, be sure to check with your state's licensing agency. There might be medical conditions that you or your doctor are required to report to the DMV.
Cancellation vs. Nonrenewal
One vital contrast to make is the difference between a cancellation and a nonrenewal. Cancellation happens during the policy period.
Nonrenewal, on the other hand, happens at the end of one policy period and before a new one begins. Since the change happens between policy periods, the rules for nonrenewal are less strict. A nonrenewal might not have been due to you or your driving. For instance, a company might decide not to cover an entire area.
If you live in that area, you'll receive a notice from your agent. You'll have time to find a new policy before the cancellation date.
Reach out to your agent if you aren't sure why your policy is being canceled. They should be able to help you find out what you can do to keep it.
Many reasons for nonrenewal do concern your driving. A DUI or too many traffic tickets might trigger a review of your policy. If you have had too many claims recently, a carrier can decide not to renew your policy.
Your provider must tell you that it is canceling your policy and why. The timeline, or how much notice it is required to give, depends on the state you live in.
What to Do If You Receive a Cancellation Warning
A cancellation letter should not appear out of the blue. The reasons a policy can be canceled are fairly extreme, so it won't happen without your notice. Drivers should have a pretty good idea of why their policy is being canceled before they even open a notice. Chances are, the carrier has reached out before and given the driver time to correct the issue.
For instance, if you are behind on your payments, you'll almost always have a grace period to catch up. Likewise, if your license has been revoked, your provider might give you time to restore your license before it cancels your policy. You might not always be able to correct the issue, but it's worth trying.
The Bottom Line
It would help if you acted quickly to correct any issues to keep your current policy. If you can't fix any of the problems, you'll need to find a policy as quickly as you can to avoid a gap.
Driving without coverage can cause a lot of problems. You'll be held financially responsible for any damages that occur during a crash. In some states, you could face legal penalties like fines or a jail sentence.
Insurance companies are required by states to notify the DMV when a policy has been canceled. If this happens and you haven't taken action to avoid a coverage gap, your state may revoke your car's tags or stop you from driving in other ways.
It's also vital to quickly restore coverage because a lengthy gap in auto insurance tends to result in higher premiums.