Whether you or your insurance company decide to cancel your auto insurance policy, it’s important to know the consequences and what happens next.
Your insurer may cancel your policy if you don’t pay the premium, have committed insurance fraud, or have your driver’s license been suspended or revoked. By working closely with your insurer, you may be able to get your policy reinstated. But deadlines and rules apply. Or, you may need to shop around for coverage from a different insurance company.
Learn the facts and respond promptly if your policy has been canceled or is about to be terminated. Letting your insurance lapse can have serious repercussions, including suspension of your driver’s license and registration, repossession of a leased vehicle, and a lower credit rating.
- The cancelation of an insurance policy means you are ending the contract before the end of the policy period.
- If you don’t pay your premium on time or don’t pay it all, your insurance provider will eventually cancel or drop your policy.
- States have different laws on the notice period an insurance company must give before canceling a policy.
- If your car insurance gets canceled for nonpayment, you should contact your insurance company. They may work out a deal with you to reinstate insurance.
What is car insurance reinstatement?
Car insurance reinstatement is the process of getting your insurance coverage restored. If you have a canceled policy, ask your insurance company about reinstating it. You can apply to resume your insurance plan, but there are chances that they might decline your request.
You get a grace period of thirty days before your policy cancellation goes into effect. It will be easier to reinstate your insurance policy if you do it before the grace period has lapsed.
Types of insurance policy reinstatement
There are two types of policy reinstatement — reinstatement with no lapse in coverage and reinstatement with a lapse in coverage.
Insurance reinstatement with a lapse in coverage
With this reinstatement, you will get your coverage back on an effective date after the date when it was cancelled. And a gap will show up on your insurance history.
Insurance reinstatement without a lapse in coverage
If you can get your insurance policy reinstated without any lapse in coverage, then you can keep up with your state’s financial responsibility requirements and insurance costs. You’ll be able to maintain compliance of the lienholder’s insurance policy as well.
What happens if car insurance is canceled?
Insurance policy cancelation means an insurance contract has been terminated before the end of the policy period. The car insurance policy can be canceled by either the insured or insurer before its expiration or termination date.
However, state laws differ when it comes to cancellation rules. When you apply for coverage and start a new auto insurance policy, the insurance company has the right to cancel your policy within the first few days of your new policy. This period is known as the binding period, typically lasting 60 days.
If an insurer cancels your policy during the binding period, it normally means it has found a problem on your driving record or credit record that makes you an unacceptable risk.
After the binding period, your insurance company may be allowed to cancel your policy if:
- You fail to pay the premium.
- You have committed fraud or made serious misrepresentations on your insurance application.
- Your driver’s license has been suspended or revoked.
“Either you or your insurance company can decide not to renew your policy when it expires,” says Mark Friedlander, director of corporate communications for the Insurance Information Institute in St. Johns, Florida. “Your insurance company must give you a certain number of days’ notice and explain the reason for not renewing before it is allowed to drop your policy.”
State laws vary on the number of days of notice an insurer must give you before the cancellation takes effect. But normally, an insurer must provide notice within 10 to 30 days. In the notice, the insurer must tell you why it has decided to cancel your car insurance policy.
“There are numerous reasons why an insurance company may choose not to renew a policy. It may have nothing to do with you personally,” Friedlander says. “For instance, your insurer may have decided to drop your particular type of insurance or to write fewer policies in the area where you live.
However, a non-renewal can also be due to your driving record or your actions that considerably raise the insurance company’s risk.”
What happens if my car insurance is canceled for nonpayment?
Make no mistake: If you are late paying your premium or don’t pay it all, your insurer will eventually drop your policy.
You have two options if your policy gets terminated due to a lack of payment.
“You can either try to push back against the cancellation or resolve the issue by contacting your insurer, especially if you think the cancellation may be due to a misunderstanding. Or you can start shopping for a new auto insurance policy from a different company,” says Cecilia Beard, a Raleigh, North Carolina-based auto insurance expert with Motor1.com.
To reinstate your policy, you will likely need to pay your premium in full and late fees and/or interest charges that may apply.
“Your auto insurer may let you pay your late premium within a new flexible timeframe,” Beard says. “However, this isn’t the case with all auto insurance providers. And you should never assume anything; contact your insurance company to determine your options and deadlines.”
Pay close attention to the date you receive a policy cancellation notice and the date the policy no longer covers you. Again, the normal range between the date of an insurer issuing a policy cancellation notice and the date you are no longer covered is between 10 and 30 days.
What are the consequences of not having car insurance coverage in place?
Be aware that, if your coverage expires:
- Your driver’s license and registration may be automatically suspended or revoked.
- Your state’s motor vehicle department may impose monetary penalties.
- You may be ticketed for driving without insurance.
- Your vehicle can be repossessed if you were leasing it.
- Your credit score and credit history may be negatively impacted for up to seven years.
- You’ll likely pay higher premiums.
Furthermore, if you drive your car while uninsured and end up in an accident you would not be covered. That can result in serious financial consequences, including paying thousands out-of-pocket for damage you cause to another car or injuries you cause to the other driver.
And the other driver may file a lawsuit against you; instead of having your insurance company in place to represent you legally, you may be required to pay your own legal expenses, including the cost of hiring a lawyer. And all of these events could force you to pursue bankruptcy.
How to reinstate canceled auto insurance
If your policy has been canceled, you may be able to get it reinstated by contacting your insurance provider, depending upon their rules and your state’s laws. Reinstatement is the restoration of a canceled policy to full force and effect.
Get in touch with your insurance representative and explain your case as soon as possible. The insurance company may work out a deal with you to settle this problem much easier. But be ready to pay off the full amount due to avoid any more headaches.
Note that reinstatement of your current policy is only allowable with the same carrier and under the same policy you previously had – not with a new insurer. Many carriers will usually reinstate a policy canceled due to non-payment if the lapse in coverage has been less than 30 days and there have been no claims/losses.
Some carriers have built-in grace periods, so read through your policy to see what is said about reinstating it if it is canceled. Be aware that the reinstatement may be effective after the policy cancellation date, creating a lapse of coverage.
Also, car insurance providers allowing reinstatement within 30 days may require you to sign a “statement of no loss.” This is a form stating you have not experienced a loss in the time you’re policy lapsed and that you cannot and will not make a claim during that time period. Some companies may charge you a reinstatement fee, as well, to reinstate your policy.
Once your policy is reinstated, “you may need to contact your state’s motor vehicle department to update your insurance information and confirm that your driver’s license and car registration are valid and remain active,” says Howard Goldberg, vice president of Customer Solutions for Plymouth Rock Assurance in Boston.
What to do if your policy cannot be reinstated
If your policy cannot be reinstated, you will need to initiate a new policy either with your current insurer (if they allow it) or with a new insurer. If you have lost your car insurance due to non-payment and cannot reinstate your former policy, it’s time to begin shopping for new auto insurance coverage.
“You may be able to find standard coverage with traditional insurers. Or you could be forced into what’s called the non-standard auto market. If so, you will likely need to purchase a policy from a private insurer specializing in high-risk drivers. These insurers write non-standard policies for drivers with bad accident records, high-performance cars, or those who live in high-risk areas,” Friedlander says.
If denied coverage through the private market, you may need to join a state-assigned risk pool.
“Auto insurers participate voluntarily in state-assigned risk goals across the United States,” Friedlander says. “Each participating insurer must accept the motorists assigned to it by the state. They will provide auto insurance coverage no matter the driver’s history, but it may be a lot more expensive than you would have paid with a traditional insurer.”
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