Auto Insurance

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What about auto insurance cancellation, non-renewal, and policy transfers?
An insurance company may stop covering you by either canceling your policy or refusing to renew it. You should understand the difference between cancellation and nonrenewal. Your insurance company may also transfer your policy to another insurer.
 

CANCELLATIONS
Cancellation is the termination of an insurance policy before its normal expiration date. The company or the policyholder can initiate this.
 

COMPANY CANCELLATIONS
A company may cancel your auto insurance under certain conditions, regardless of whether you have a binder (a temporary document issued by the agent that provides proof of coverage, or proof of insurance). Once the binder is issued and before the actual policy is issued, the company may cancel your coverage for any valid reason, but must give you five days written notice. Valid reasons for canceling a policy or contract include misrepresentation by the policyholder, or simply that the policyholder is not eligible under the company's underwriting guidelines.

Once the policy has been issued, the company may cancel your policy during the first 60 days of coverage for any valid reason, but must give you 45 days written notice, or only 10 days notice if your premium check bounces. If your insurance company cancels your policy, it must refund any unearned premiums, or money paid in advance but not yet used.

The company may cancel your policy after 60 days only if:
 
  • You provide misinformation on your application or file a fraudulent claim. The company must give you a written notice of at least 45 days before it cancels the policy.
  • The state suspends your driver license or vehicle registration. This also applies to any driver who lives with you or regularly operates a vehicle insured on your policy. The company must provide you with 45 days written notice before it cancels the policy.
  • You do not pay your premium. Your company must give you 10 days written notice before it cancels your policy. Many companies meet this requirement by simply mailing bills to policyholders at least 10 days before the due date, advising that the policy will cancel on a specific date unless the premium is paid. The company may then cancel policyholders who fail to send payments on time.
 
Remember: An insurance company cannot cancel your insurance policy for accidents that you were not responsible for causing. But, if you have three or more accidents in a three-year period, the company may not renew your policy when it expires.
 

POLICYHOLDER CANCELLATIONS
 
You may cancel your auto policy at any time following the first 60 days after its effective date by notifying your company in writing. If you do so, the insurance company may charge you a 10 percent penalty on your returned premium.

This refund of your unearned premium must occur within 30 days of the time they receive your request to cancel. If not, you should receive an additional 8 percent interest on the amount due, unless it was financed through a premium finance company - in which case the refund will then go to the finance company for application to the contract.

You cannot cancel your policy during the first 60 days unless you can provide proof of the following:

 
  • The vehicle is totally destroyed
  • You sold the vehicle or
  • You obtained coverage with another company.
 

NONRENEWALS
Nonrenewal is the termination of an insurance policy at its normal expiration date. An insurance company that decides not to renew your policy must notify you in writing at least 45 days before the expiration date. The following are examples of reasons for nonrenewal:
 
  • Excessive claims or accidents. An insurer may opt to not renew your policy if you have had three or more accidents - regardless of fault - within the past three years. It may also decide not to renew if you have a series of claims and no longer meet its underwriting guidelines. A company cannot refuse to renew your policy if you have had only one at-fault accident within the past three years.
  • Traffic violations - An insurer may decide not to renew your policy if you receive a conviction for a major violation, such as DUI or leaving the scene of an accident. The company may also decide not to renew your coverage if you receive convictions for several minor violations.
  • Company guidelines - The company may elect not to renew your policy if you no longer qualify for coverage. Some common reasons why you may no longer qualify include adding coverage for a sports car to your policy or submitting an excessive number of towing or comprehensive claims.
 

POLICY TRANSFER
Instead of canceling or not renewing your insurance coverage, a company may transfer your policy to another company in the same insurance group. Your company must give you 45 days advance notice of its intent to transfer your policy. It must also inform you of any new premium costs and specific reasons for any premium increase.