why car insurance policies are canceled
A canceled car insurance policy leaves you financially vulnerable to out-of-pocket accident expenses, and driving uninsured can lead to fines, suspended licenses and registrations, and even higher premiums on future policies. In other words, policy cancellations are bad news. We'll cover some common reasons why insurance companies cancel policies and what you can do if your policy's canceled.
Common causes of policy cancellation
A canceled policy is different from a policy that is nonrenewed. Canceled policies happen before the term expires, and insurers may cancel a policy for various reasons. A nonrenewal means a policy won't be renewed once the current term expires.
These are a few common reasons a policy could be canceled mid-term.
Lack of payment
This one's fairly obvious. To keep a car insurance policy active, you pay for it through premiums. Just like your cable or electric bills, if you fall too far behind on payments, your policy will eventually be canceled. If you're an Esurance customer who hasn't paid your past due installment after 30 days, your policy will be canceled.
Before this happens, however, your insurer will likely contact you several times to make sure you're aware of upcoming deadlines or impending cancellation. If you're behind on payments, check to make sure your insurer has the right email address and phone number on record to avoid missing these warnings.
Car insurance fraud is committed when someone deceives an insurance company for financial gain.
If an insurance company spots fraud, the driver's policy can be canceled and, in some cases, criminal charges may be filed.
License revocation or a conviction for a major moving violation
If a driver's license is forcibly suspended or revoked for any reason, your insurance company may cancel the driver's policy.
If the convicted driver is listed on a policy with other drivers, that driver could be removed from the policy until driving privileges are restored.
In some cases, serious moving violations or a high number of accidents can also lead to a canceled policy.
Health issues that may impair driving
In some cases, coverage may be canceled if a driver is diagnosed with a certain medical condition that makes it unsafe to drive. In Illinois, for example, car insurance companies can cancel a policy if a driver is diagnosed with epilepsy and the driver's doctor doesn't provide proof that the condition will not impair driving.
What to do if your policy is canceled
If your car insurance is canceled, find new coverage as soon as possible. You can start by getting a quote through Esurance.
There are 2 reasons for this rush. In the short term, if you continue to drive and have an accident, you'll be responsible for paying any post-accident expenses out of pocket. And in the long term, a gap in insurance can lead to higher insurance premiums when you do get new coverage.
Once a policy is canceled, insurance companies are required to alert the state's Department of Motor Vehicles. If the driver is unable or chooses not to find active coverage, the state may require that driver to turn in the car's tags and surrender driving privileges or buy a new car insurance policy. The state's goal is to keep uninsured drivers (and their related expenses) off the road.
Remember that your insurer wants to keep you on as a customer. By paying your premium on time and driving safely, you likely won't face a policy cancellation. But in case you ever do, it helps to understand why it happened and to start shopping for a new policy as soon as possible.
Car insurance fraud
Find out what constitutes fraud and how all drivers can end up paying for it.
Insurance myth: A lapse in car insurance coverage won't affect your rate
Discover exactly how and why a lapse in car insurance coverage may affect your premium.