Why Would An Auto Insurance Company Cancel Your Insurance Policy?

Many states require mandatory automobile insurance before you can register or drive a vehicle. You may assume that once you purchase your first auto insurance policy you will be protected as long as you wish to keep the insurance. In many cases, this is true, but sometimes insurance companies can cancel your insurance, leaving you scrambling to get your vehicle covered. Be aware of these instances when your insurance company can legally terminate your insurance.

Non-Payment of Premiums

Many insurance companies will offer installment payments (for a small fee) on your total premium for the term of the policy. You may assume there is a grace period that allows you to make the payment within a few dates of the due date, but that's not how insurance premiums typically work. Your policy will automatically terminate if you miss the due date for your scheduled payment. This means if your due date is on January 15, the insurance company must receive your payment no later than midnight on January 14. If you are relying on the mail to deliver your payment, make sure to allow the appropriate number of days.  Relying on postmarking the payment before the due date can result in losing your insurance coverage.

Misrepresentation of Facts or Fraud

If your insurance company determines that you have misrepresented the facts or concealed information that might have prevented you from obtaining a policy, they can cancel your policy. This may include things such as failing to include licensed drivers in your household on the policy or providing false information regarding a claim or failing to comply with the terms and conditions of your policy. While it may be tempting to withhold information or to present the facts in your favor, you do so at the risk of losing your auto insurance and may face more serious consequences. Use caution to provide true and accurate information and to adhere to the terms of the policy.

Suspended License

If you, or another member of your household named on the policy, gets your license suspended or revoked, your auto insurance company can cancel your insurance. Some states may have specific guidelines that exclude some suspensions. For example, in the state of Maine, your auto insurance cannot be canceled if the suspension is the result of a first or second suspension of a provisional license or the transportation of alcohol by a minor. Other exclusions may exist in your state. If you have questions about how a suspended license will affect your auto insurance policy, check with your state department of motor vehicles.

Can you get another insurance policy if your policy is cancelled?

Your insurance company may reinstate your policy after a cancellation if you meet their terms. In the case of non-payment of premiums, the auto insurance company may require you to pay the premium upfront. It may also increase your rates. Likewise, a record of cancelled or non-renewed auto insurance policies may make it more difficult for you to get insurance through another insurance company, or it may increase your risk and come with a higher price tag than your previous insurance. Because insurance companies use their own formula to calculate the cost of insurance, you may need to shop around to get the best price on comparable insurance.

Will I need to get an SR-32 certificate?

Your state may require you to produce an SR-32 certificate to verify that you have auto insurance before your license is reinstated. This form verifies that you have purchased the required auto insurance and have paid the premium in full. Your regular insurance company may provide this certificate for you, or you may need to seek out a company that specializes in providing SR-32 insurance certificates.

By avoiding issues that could cause your auto insurance company to cancel your insurance, you can avoid the added cost and hassle of reinstating the policy or the need to seek out another insurance company to meet your needs.