Yes, an insurance company can cancel a policy after it has been issued for a few reasons in most states. Most state insurance regulators have restrictions on when and why an insurance policy can be canceled after its inception date.

For example in California, there are only three reasons an automobile policy can be canceled/non-renewed once it is issued:

1. Fraud/material misrepresentation;
2. Non-payment of premium; or
3. Substantial increase in the hazard insured against.

Cancellation notices must be mailed or delivered to you at your last known address accompanied by the reason, at least 10 (ten) days prior to the effective date of cancellation for nonpayment of premium, and twenty days for all other reasons.

For nonrenewal, notices must be forwarded to you at least thirty days before expiration. The nonrenewal notice will state that, upon your written request, the company will give you the reason for nonrenewal.

These notices are required to give the policyholder an opportunity to pay the past due premium and keep the policy in force (if nonpayment is the issue) or to secure other insurance.

In Florida an insurance company is prohibited from canceling only for nonpayment of premium within the first 60 days, unless the nonpayment is the result of a dishonored check. Otherwise, the company’s rights to cancel are the same as allowed by Florida Statute 627.728.

Once the policy has been issued in Florida, 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. 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.

In Florida the insurance 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; or
• 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. These companies may then cancel the policy on the listed date.

To find out more information on regulations regarding auto insurance cancellations and nonrenewals contact your state's insurance regulatory body. Also see our Learning Center for helpful articles such as "What are the differences between a cancellation notice and non-renewal notice?"