For most people the most common cause of insurance cancellation is a missed or late policy premium payment. But what can you do if your insurance is cancelled.
With a tight budget, you might be tempted to let an insurance payment slide, and in some states that might not be a problem. Insurance grace periods are set by the individual states and can even change depending on the policy type. Typically the period that a policy can be reinstated might be as short as 24 hours and could be as long as thirty days.
In addition to late payments, you may also run the risk of cancellation as the result of too many accidents, multiple insurance claims, or significant risk characteristics changes. (Excessive speeding, DWI’s, poor maintenance, health issues, etc.)
Of course, having your insurance cancelled can have serious repercussions. Not only can you be subject to civil penalties, you also run the risk of financial devastation.
You might say that insurance cancellation is one method that an insurance company maintains a healthy risk pool. Insurance companies set minimum risk standards that they feel are necessary to maintain a competitive Insurance rate (price). Basically the higher the minimum underwriting standards, the better the insured they can attract and the lower the price they can charge. While most people are aware that claims and accidents can affect insurance price, your payment history also says a lot about you.
Insurance is in business of predicting losses and it turns out that your financial habits can be a big indicator of your loss characteristics. While it is hard to predict when an accident will occur, it is easy to keep track of payment history (your credit reports). Insurance companies refer to the coincidence as a “proxy-variable”, basically taking advantage of the ability of predicting losses based on a behavior or habit.
Not paying bills is a big one!
If you receive a notice of cancellation, time is not on your side. It is important to respond immediately by either calling your local agent or by contacting your company’s customer service line.
If you are a good driver and have not had any claim or policy change activity chances are good the company will offer you a reinstatement. Unfortunately they may attach conditions to that offer! They may ask you to sign a “statement of no-loss” that covers the time in which you had no coverage. They may also require a reinstatement charge along with late fees. Even with these charges it is normally best to accept these conditions rather than end up with a cancellation on your record. Obtaining coverage after a cancelation almost guarantees that you will end up classified as a “High Risk”.
As mentioned before, if you realize that you are late with an insurance payment or if you have received a cancellation immediately:
- Contact your Insurance Agent or Insurance Company.
- Determine the reason for the cancellation.
- If a late payment has occurred, seek immediate reinstatement.
- If reinstatement is not offered immediately seek replacement coverage from another company.
- Do not drive or let someone drive you vehicle until you have replacement coverage in force.
Remember, insurance cancellation laws are regulated by the individual states and are subject to each companies underwriting criteria. In all cases, immediate action is required.
Other Enhanced Insurance articles related to car care and purchasing:
Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.
While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.