Although uncommon, there are times when an insurance provider will cancel someone's insurance policy. When it happens, the person affected can be left feeling confused and unsure what to do next. Here are three things you should know about auto insurance cancellations to help you avoid or better manage this type of situation should you find yourself in it.
Reasons Your Insurance May Be Cancelled
There are a couple of reasons why an auto insurance company may cancel your policy. In fact, in many states, the law allows a provider to cancel a policy for any reason within a certain period of time. For instance, companies in Illinois have 60 days after the start of the policy to revoke coverage on any basis. After 60 days, however, they can only cancel a person's policy for a reason allowed by law.
The most common reason insurance companies cancel policies is for non-payment. Another common cause of insurance cancellation is being convicted of a serious driving offense such as a DUI or having your license revoked. Committing fraud is another cause of insurance cancellation. For instance, the company can decide to stop coverage if it finds out you lied on your application.
However, many drivers may be surprised to learn that insurance companies are allowed to cancel policies of policyholders who suffer from medical conditions, namely ones that affect their ability to drive. For example, you may be dropped if you have a seizure disorder or heart condition that increases your risk of being involved in an accident. In this case, you would need to obtain a note from your doctor stating you are still capable of driving regardless of your medical issue.
You Can Dispute Cancellations
People facing insurance cancellation may think they simply have to live with the insurance company's decision. However, you can dispute the company's decision to cancel your insurance. Considering the time and expense involved in obtaining a replacement, it may be worth the effort to save your current policy.
The law requires insurance companies to notify policyholders beforehand that they intend to cancel their policies. This time period can be anywhere from 10 to 45 days prior to the date of cancellation. If the insurance company doesn't state in its cancellation letter why it's ending your coverage, you can call and get the information from a company representative. If you feel the company is in error, then initiate the dispute process.
You can usually find information about the dispute process in your insurance policy. Typically, this involves sending a letter to a specific address or department within the company. Be certain to include copies of any evidence to bolster your case. For instance, if the insurance company says it's cancelling because your driver's license was revoked but you know it wasn't, send a copy of your driving record showing your license is still active.
Cancellation May Affect Your Credit
An insurance cancellation typically won't affect your regular credit score unless your policy was cancelled for non-payment and you don't pay any balance due. However, it can have a negative impact on the insurance score used by insurance providers when estimating a potential client's risk. The cancellation will show up as a black mark on this particular credit profile, and too many cancellations will make it difficult for you to secure insurance from other providers. This is why it's a good idea to dispute a cancellation if you feel it's unwarranted.
An alternative option is to see if the company will consider doing a non-renewal instead of a cancellation. A non-renewal simply means an insurance company opts not to renew your policy and has absolutely no bearing on your regular or insurance credit scores. If you're only a month or two away from the end of your current policy, discuss a non-renewal option with the company, particularly if you've been with the company for awhile. This will save your credit and provide you with time to get an alternative policy.
For more information about how to handle an auto insurance cancellation, contact an insurance provider, like Colling Insurance Services, Inc, in your area.