Question: If my policy was canceled and I am told I can appeal the decision, must my insurance company cover me until the hearing?
Answer: No, not normally. State laws differ on how car insurance policy cancellation or non-renewal appeals are handled, but most say that there is no guarantee that your policy will be reinstated. Thus, you shouldn’t delay looking for alternative coverage before the cancellation date arrives.
Not only can a lapse in coverage can put you and your assets at risk, you will have a much more difficult time finding car insurance coverage in the future with a gap in your record. The policy will be far more expensive as well.
If you believe your car insurance company shouldn’t have canceled your policy, the cancellation notice should explain how to appeal the decision. If you need clarification on the appeal's process, contact the consumer division of your state’s Department of Insurance (DOI) for help.
As I mentioned, most states say that consumers should find coverage elsewhere during the appeals process. Florida even mentions this in its law. Florida Statute 627.728 states that the DOI “does not have the authority to extend the effective date of the cancellation; therefore you should obtain replacement coverage prior to the effective date of the cancellation.”
Valid reasons for cancellation
As you should be aware, each state has certain reasons that a car insurance company can cancel a policy, after the binding period (the first 60 days in most states but can only 30 or up to 90 in some states). During the binding period (sometimes called “underwriting” period), the company can cancel your policy for nearly any reason since this is the time it has to look at you as a risk (verify the information you’ve given it) and determine if it wants to issue you a policy.
Reasons for cancellation after the binding period vary by state but typically include items such as:
- Nonpayment of premium
- Fraud or material misrepresentation
- Violation of terms and conditions of the policy
- Failure to disclose fully your motor vehicle accidents and moving traffic violations for the preceding 36 months (if called for in the application)
- Anyone insured on the policy made a false or fraudulent claim or knowingly helped someone else make a false or fraudulent claim
Other reasons for cancellation may exist. For example, in your home state of Maryland cancellation of your car insurance policy is permitted due to fraud, misrepresentation, non-payment of premium or one of the following conditions:
- If there exists an issue or matter related to the risk that constitutes a threat to public safety.
- If there is a change in the condition of the risk that results in an increase in the hazard insured against.
- If the driver’s license or motor vehicle registration of the named insured or any covered driver is suspended or revoked related to their driving record.
- If you have filed two or more claims or accidents that you caused or were considered at-fault for within a three-year period.
- If you have filed three or more not-at-fault claims within a three-year period.
A Maryland car insurance company can non-renew your policy for many of the reasons above, or because:
- If within the law two years you had three or more moving violations.
- You filed any combination of three or more at-fault accident claims or moving violation convictions within the last three years.
- You were convicted of operating a motor vehicle while under the influence of drugs or alcohol, impaired or intoxicated, or any combination of drugs and alcohol that impaired your ability to operate a motor vehicle.
- You were convicted of homicide, assault, reckless endangerment or criminal negligence rising out of the operation of your vehicle.
- You were convicted of using a motor vehicle to participate in a felony act.
- You violated the insurer’s underwriting guidelines.
Appeals process varies
The appeals process is different in each state, including how quickly you need to start it. Typically, you are given 10 to 30 days. Once you request an appeal, some states will investigate your situation and make a determination. In other states, it will go straight to a hearing.
Your state’s DOI, the Maryland Insurance Administration, can give you information on what you need to do to initiate the appeal, how the process will work and if your policy will be in effect during the course of the appeal.
If new car insurance coverage is needed during the appeal, or if you lose your appeal, you should compare car insurance rates for a replacement policy. I’d even recommend comparison shopping before making the appeal.
Unless there is a specific reason you want to stay with your current car insurance provider, you may find cheaper car insurance rates elsewhere and decide it’s better to switch insurers now and not spend your time and energy on an appeal.