Why Did I Get a Car Insurance Cancellation Letter

Texting and driving
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Auto insurance coverage is not a luxury, it is a necessity. It is also, with a very few notable exceptions, a legal requirement for drivers in the United States. If you have recently been caught driving without it, you know that the penalties can cause a real headache and take a big bite out of your pocket book. It's no wonder then that getting a letter from your insurer informing you that it is cancelling your policy can be a bit disconcerting.

Before it causes a real panic, though, it's a good idea to understand just what cancellation means and how to deal with it. Here's what to do after receiving an insurance cancellation letter.

Why am I being cancelled?

Believe it or not, it's actually pretty unusual for an insurer to cancel one of its policies. In most jurisdictions, an insurer can cancel a policy for almost any reason during the first 30 or 60 days it is in effect. During that initial period, an insurer may cancel a policy if the it discovers information about the insured either not disclosed or misrepresented by him or her during the application process. After the initial period, cancellation of a policy by a carrier becomes, by law, much more difficult. It will have to have a good reason to do it. By far the biggest reason for cancellation is failure to pay one's premium, although it may also be cancelled  for such actions as the suspension or revocation of the insured's driver's license.

Cancellation vs. Non-renewal.

Cancellation happens during the policy period. Non-renewal is what happens at the end of one policy period and before a new policy period begins. There are many reasons why an insurer decides to not renew an insured's policy, chief among them are: a change in the insured's driving record, such as a DUI or accumulation of moving violations; multiple claims against the policy; and the insured moving to a state where the insurer does not write policies.

Your insurer is required to inform you of its intention not to renew your policy a designated number of days (specified by law) before your current policy is up in order to give you time to seek out coverage elsewhere.

What to do if you receive a cancellation warning.

If you receive a auto insurance cancellation letter, chances are that you had a pretty good idea it was coming. That's because insurance companies take cancellations pretty seriously and they will likely provide you with one or more warnings before actually cancelling your policy. 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 they discover that there is a driver in your household who is not listed on the policy, they will likely provide you the opportunity to add him or her. In cases where you receive a chance to correct a problem, the best advice is to do so as soon as possible.

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