I was dropped by my car insurer. Now what?

After Michelle Hancock Gordon’s teenage daughter Anna had too many accidents and tickets, USAA threatened to cancel the auto insurance policy for the entire family, who had been with the company since 1985.

USAA ultimately only dropped Gordon’s daughter, now 21. It also put Gordon in touch with Liberty Mutual to secure another policy to cover her daughter.

“[USAA] said they would think about taking her back if her record stayed clean for three years,” says Gordon, who lives in Kansas City, Missouri. “They didn’t care that we had been with them since 1985. They ran a report that showed three fender benders and three tickets, and they were done with her.”

It’s not just drivers with less-than-pristine records who get dropped.

Ellie Yahn’s car was totaled when she was rear-ended in Boulder, Colorado, by an uninsured driver who appeared to be impaired.

“She just took off before I could get any information,” says Yahn, 30, who lives in Denver. “I had to get the police involved.”

Yahn hadn’t had an accident or received a ticket since she was 18 or 19. She said Liberty Mutual dropped her after the accident when it discovered she had moved to Colorado from Seattle without disclosing that fact to the insurer.

“It was definitely hard to find a new carrier,” Yahn said. “But luckily, they gave me a grace period [to find a new carrier].”

Yahn is now insured with Allstate but said she is paying more for coverage than ever.

“It’s just really expensive out here compared to other places I’ve lived, so trying to figure out what I could afford but also be covered for what I needed took a while.”

Why did my insurance company drop me?

An insurance company may not renew a client’s policy at the end of its term for many reasons, including having multiple accidents within a three-year window or too many insurance claims. Each insurer has its criteria for determining how many accidents are too many.

“Three claims in five years is the kiss of death for us,” says Newton Hamacher, an insurance agent with Country Financial in Richmond, Missouri. “The next company you get will probably upcharge you for having too many claims.”

Hamacher says he’ll be dropping a commercial account next year. The client is a mechanic who buys used school buses, fixes them, and sells them.

“We’re giving him a heads-up that we’re no longer insuring auto lots,” says Hamacher, who noted that his agency avoids selling vehicle insurance to companies that don’t purchase other business insurance-related policies.

The good news for people dropped by their insurance company is that the market is competitive, says Janet Ruiz, director of strategic communication for the Insurance Information Institute (Triple-I), an industry research and education organization. And there are even companies that focus on drivers who have poor records.

“Good drivers, and in most states good credit, are the focus of many car insurers,” she says. “But there are car insurers that specialize in less-than-stellar drivers. They can charge more for that when they’re getting their record back together.”

In many cases, insurance companies drop policies for families whose children have multiple tickets or if someone gets a DUI.

“Most people will go to a different type of carrier until they clean up [their driving record],” Ruiz says. “Then they’ll go back to a more standard carrier as things drop off their record after about three years.”

What do I do if my car insurer drops me?

If you’ve gotten a notice that your car insurance will be canceled, the first thing to do is figure out why. Understanding the reason for the cancellation can help you address the issue and potentially find new coverage. Your insurance company is legally obligated to give you advance notice, though the exact amount of time varies by state.

Companies cannot cancel your auto insurance without warning. They must notify you in writing as required by state law. A 30-day advance notice is standard, though some states require a longer period of up to 90 days.

Here’s what you can do if your insurance is dropped:

• Ask your insurance company to reinstate your coverage. Many people try to get their old policy back first. Contact your insurance company to find out why your policy was canceled. If it was a simple mistake, like a missed payment, you might be able to get your coverage back quickly.
• Don’t drive without car insurance. In all but one state, driving without car insurance is against the law. The penalties can be severe, including loss of your driver’s license, suspension of your car registration, hefty fines, and potential jail time. If your insurance is canceled, don’t drive until you get new coverage. Find other ways to get around, such as using public transportation, biking or asking friends and families for rides.
• Look for a new insurance provider. If your insurance company won’t reinstate your policy, you’ll need to find a new one. Start by getting quotes from different insurance companies. Knowing when your current policy ends is essential to get new coverage without a lapse.
• Prepare for higher rates. If your insurance was canceled because you didn’t pay your bills, caused accidents or got too many traffic tickets, you might be considered a high-risk driver. This usually means higher insurance rates. Look for a company specializing in high-risk insurance.

What is the difference between a policy cancellation and a non-renewal?

Cancellation means your policy is ending before its expected expiration date. Insurance companies can’t cancel policies that have been effective for more than 60 days unless you haven’t paid your bills or lied on your insurance application.

Nonrenewal means your policy won’t be renewed when the current term ends. Either you or the insurance company can choose not to renew it. If the company decides not to renew your policy, it must give you advance notice and explain why — it may not be because of anything you did. Some of the reasons insurance companies don’t renew policies include the company stopping that type of insurance or deciding to cover fewer people in your area.

Frequently asked questions

What is a no-loss statement?

A no-loss statement is a signed declaration that nothing terrible happened to you or your car while your insurance was canceled. It’s like saying, “I promise I didn’t get into any accidents or damage my car during this time.”

You’ll usually need to provide this statement to reinstate your insurance and pay any missed payments and fees. However, check with your insurance company for other requirements.

What happens if I allow my car insurance to lapse?

Letting your car insurance lapse can be a costly mistake. Whether you forgot to pay your bill or intentionally dropped coverage, it can lead to higher insurance rates. Insurance companies see these gaps in coverage as a red flag, which means you might pay more. Plus, driving without insurance can result in fines, tickets or a suspended license.

If you cause an accident while driving without insurance, you could be on the hook for all the costs, including car repairs and medical bills. To protect yourself, keep your insurance active by paying your bill on time, renewing your policy regularly and driving safely to avoid accidents.

Can I cancel my auto insurance policy?

Yes, you can cancel your auto insurance anytime, but there are a few things to consider.

You may receive a refund for the unused portion of your premium, but there could be a cancellation fee. Some states have specific rules about canceling car insurance, so it’s a good idea to check your local regulations.

If you cancel your policy, ensure you have new coverage before the old one ends to avoid a lapse in coverage. If you finance or lease your vehicle, your lender or lease company usually requires you to maintain continuous comprehensive and collision coverage.