Don't Make a Mistake When You're Driving

You expect your auto insurance policy to be in effect when you need it. If you are involved in a collision, or your vehicle is stolen, you hope your insurer will cover the costs. After all, this is the purpose of having coverage. But what if your policy is cancelled? And more importantly, what can you do to prevent cancellation in the first place?

Below, we’ll present the three most common reasons auto insurance companies cancel their customers’ policies. You’ll also learn what to expect in the event your insurer decides to cancel your policy.

#1 – Lying To Your Insurer

It’s tempting to “bend the truth” when completing your application for coverage. For example, you might reduce the number of miles you drive each year; you may neglect to mention certain aftermarket components that are installed on your vehicle; or, you might omit the fact that you use your car for business purposes. These misrepresentations seem almost trivial. But your insurer sees things differently.

When you lie on your application, you risk having your policy cancelled since your rates are based on the insurer’s presumption of risk. Imagine claiming to drive 5,000 miles each year, but actually driving 15,000 miles per year. The longer you’re on the road, the greater the likelihood you’ll be involved in an accident. That increases the risk you’ll file a claim.

Your insurance company may simply adjust your rates to reflect your actual circumstances. But they might also cancel your policy, and void your coverage.

#2 – Loss Of Driving Privileges

If your driving privileges are revoked, your auto insurer is likely to cancel your coverage. The reason is simple: you shouldn’t be driving if you are legally prohibited from doing so. Moreover, the circumstances that led to your driver’s license being revoked or suspended suggest a decision that increases your insurer’s risk.

A lot of people attempt to hide the fact that their driver’s licenses have been suspended. This is unlikely to escape an insurer’s notice. Car insurance companies regularly check the driving records of their policyholders in order to monitor changes. License suspensions, DUIs, and similar items will show up on your record. Hiding them is useless.

#3 – Late Payment Or Nonpayment Of Premiums

This is the most common reason auto insurance policies are cancelled. Many consumers either fail to pay their premiums, or are habitually late when doing so. Insurers often extend a grace period, especially for policyholders with a long track record of making timely payments. But some companies may have short grace periods (i.e. a few days), or none at all. If you fail to pay your premiums on time, you may find your coverage cancelled.

Nonpayment of premiums often occurs when consumers switch car insurance companies to take advantage of lower rates. They make the mistake of thinking their old policies will simply become invalid due to nonpayment. In reality, the policies are cancelled, which poses long-term consequences.

Consequences Of Having Your Auto Insurance Policy Cancelled

Insurance companies tend to avoid consumers whose policies have been cancelled. The reason is because cancellation implies a high degree of risk – often a bad risk. This means you may have difficulty finding an insurer willing to extend coverage at an affordable rate. Some companies will refuse to extend coverage at all. You will essentially become classified as a “high-risk” driver, even if your driving record is blemish-free.