What to Do When Your Car Insurance Drops You

Getting dropped by your car insurance provider sounds like a scary prospect. Thankfully, there’s usually another company willing to catch you. Getting dropped isn’t always a bad thing on your part – sometimes companies change business models or areas of operation and can leave you without coverage.

But, if you have done something that makes your car insurance carrier want to drop you, you should understand what the issue is to prevent it moving forward. We’ll explain if and when an auto insurance provider can drop you. And remember, no matter why you get dropped, know that you have options. 

Yes, your car insurance company can drop you. You can be dropped for a variety of reasons, from racking up too many accidents or claims to criminal violations. “Dropping” can describe the process of your insurer either canceling your policy or non-renewing your policy. There are notable differences between the two. A nonrenewal would take effect at the end of your current policy term, while a cancellation of your policy can occur at any point during your policy period.

All private insurance companies, including car insurance carriers, are in the business of minimizing risk. They only agree to cover policyholders as long as it’s favorable for them to do so financially. Car insurance companies determine whether you’re worth covering in a process called underwriting. 

If you’re deemed too high of a risk during the underwriting period, your car insurer can cancel your policy. Any time after the underwriting period, your insurance company can only cancel your coverage for serious infringements. But, if you start accumulating citations or committing actions that make you a greater risk, your carrier will likely put your policy up for nonrenewal.

Policy nonrenewal is a more common outcome than outright policy cancellation. Some common causes of an auto insurance policy nonrenewal are:

If you begin to accumulate a lot of accidents or tickets, your insurer may begin to view you as too risky to cover. If this is the case, your carrier will likely wait until the end of your current policy date when it comes time to renew. Then, they may either raise your premiums greatly to offset your increased risk, or they might choose to non-renew the policy. Nonrenewal means that come the end of your policy term, your existing provider will no longer cover you.

Sometimes, you might not do anything wrong and still receive a notice of policy nonrenewal. This is why in some nonrenewal notices you receive from your provider, they’ll mention that their decision to not renew your coverage is strictly “a business decision.” 

For instance, as mentioned above, your insurance company may no longer write policies in your area. Or, sometimes insurance companies become insolvent or bankrupt, and they may not be able to maintain your plan anymore. 

Also, moving to a new state with different auto insurance regulations could cause a nonrenewal, since you’ll likely need different coverage wherever you’re moving.

A cancellation, on the other hand, would apply immediately and could cut your current policy term short. A policy can get canceled if:

A cancellation is a more dire course of action since it can promptly end your coverage. As you can see, cancellations typically constitute more serious and often criminal offenses on the part of the policyholder.

The only time your policy can be canceled for less severe infractions is during your plan’s underwriting period. The underwriting period occurs just after you bind and usually lasts for about the first 60 to 90 days of coverage. During this time, your insurer may be verifying all your information and confirming your risk level. If they find something unexpected, they can cancel your policy during this time.

States have laws preventing discrimination – it should be a business decision to cancel your policy during the underwriting period. For instance, if your insurer determines your accident or claims history is too concerning after further review during the underwriting period, they may cancel your coverage.

Your car insurance policy can never get canceled without notice, though. During the underwriting period, an insurer may be required to provide you a notice of cancelation at least 10 days before it happens. Afterward, they may be required to send a notice 30 to 60 days beforehand. It varies by state according to the law.

There is no set number of claims you can file before you get dropped. But, too many claims within a three or five-year period can cause your insurer to not renew your policy. The exact number before your carrier makes this decision varies by company, though.

One of the reasons there is no set limit to the number of claims before you get dropped is because the type of claim you file matters to providers. Companies usually view claims from accidents where you’re not at fault less seriously than at-fault claims. Also, comprehensive damage claims may be viewed more lightly than collision damage claims. 

If you’re filing more than one or two claims every year, though, your carrier will likely have some questions.

Too many claims make you a high-risk driver. Whenever you become too much of a risk to cover, your insurance company will send you a letter of nonrenewal. Certain high-risk drivers will need an SR-22 (or FR-44) form filing with their state before being eligible for auto insurance.

After a serious infringement, like driving under the influence, driving without a license, or driving uninsured, you may need to get an SR-22. An SR-22 is legally ordered, and it confirms that you have insurance coverage and meet your state’s insurance requirements before you’re allowed to drive again.

If you need an SR-22, you present a large risk for an auto carrier. You’ll likely have to pay much higher rates for coverage, and the number of companies willing to insure you will be limited.

If your car insurance carrier decides not to renew your policy, you may want to contact them to find out why. You may be able to come to some sort of agreement with them to maintain coverage. If not, you’ll need to start shopping around for new car insurance.

Once you receive a letter of nonrenewal, it’s not a bad idea to reach out to your provider. They can offer more details on why you were dropped if it isn’t clear in the notice. You can also try to work out a deal to stay with them. And, there’s always a slight possibility that your nonrenewal was sent by error, so reaching out to your carrier can potentially clear this up.

Nonrenewal letters sometimes may also contain phone numbers of referred companies you could use instead, or they may contain information about an insurer of last resort or a government resource that can help you find coverage in your area.

But, if you find out your car insurance is definitively not being continued, it’s time to start shopping around. Comparing quotes from several different providers is the best way to find coverage at a good rate. At Clovered, we have dedicated agents who want to help you find a policy that satisfies you and your state’s needs. You can fill out our quote form with basic information in just a few minutes, and you’ll hear back from one of our agents promptly.

It’s important to begin shopping for insurance before your current coverage lapses. You can’t drive in any state (except New Hampshire or Virginia) without car insurance. It’s illegal to do so. And, letting your car insurance lapse is a huge red flag for insurance carriers. Having a lapse in coverage immediately marks you as high-risk, and you’ll very likely pay higher rates to get a policy after a lapse.