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Must I tell old insurer about my new insurer?


A

Question: Five days after starting a car insurance policy with a new insurer I canceled with my previous insurance company. The old company is threatening to continue to charge me unless I give it the name of my new company. I already told it the start date of the new policy; does it need more information?  If so, why?

Answer: It may be state law that is requiring your old car insurance company to demand that you provide it with detailed information about your new car insurance provider, or it could be internal guidelines of your previous insurer.

Some states have insurance laws that require a car insurance company to verify that you have a new auto policy in place for your car before canceling your old policy -- if your the policy had just recently started.  This is to stop car owners from buying a policy just to register a car and then cancel it and proceed to drive uninsured.

For example, Florida law (Statute 627.7295) doesn’t allow motorists to cancel their car insurance policy during the first two months after the effective date unless:

  • You have sold or otherwise transferred ownership of the vehicle
  • You have surrendered the title due to the total destruction of the insured vehicle
  • You have purchased a replacement policy with another car insurance company

Also, many states’ laws mandate car insurance carriers report cancellations of any car insurance policy to the state. 

These states typically also require new policies be reported.  This way, the state insurance database can match up cancellations with new policies to keep track of drivers who may be uninsured.

If your previous insurance company can report not only the cancellation of your old policy, but also give information on the new policy you have in place, it can help your state match up your information properly.  This will make it less likely that you will mistakenly tagged as being uninsured when you are not.

The tracking of your car insurance policy cancellation and effective dates is also a good reason to start your new policy before canceling your old one.  You did this with five days of overlap (though only one day of overlap is usually fine).  In some states, if it’s found that you had just a one-day lapse in car insurance coverage from the time you canceled one policy and started the next one,  you can be penalized.

If it’s not state laws that are requiring the information on your new car insurance company, it’s possible that it could be internal records the insurance company keeps. 

Perhaps your insurer wants to know who it’s losing business to or keeps the information on hand just in case the state has questions about the cancellation.  By documenting in its notes information on your new policy, the insurer can point to its records and show the state you had a new policy elsewhere at the time of the cancellation if asked.

To find out the specifics of why your particular car insurance company is refusing to end your policy unless you give them detailed information about your new insurance provider, you’ll have to ask it directly. 

As long as the company’s explanation is legit, there shouldn’t be a reason to keep the information from your old insurance company.  Also, it will allow you to cancel that old policy and keep from being charged for coverage you aren’t using.

If your previous insurer isn’t forthcoming about why it wants your new car insurance company information, then you can contact your state’s insurance regulator to find out if you must provide this information and make a complaint if necessary.

More articles from Penny Gusner


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