Know your rights when it comes to buying and keeping car insurance coverage.
This post comes from Mark Vallet at partner site Insurance.com.
Imagine this: Your insurance agent calls and informs you that your auto insurance policy is being canceled, offering no further explanation.
You are stunned. The first question that pops into your mind is: “Can they actually do this?”
The answer to that question is a very unsatisfying “it depends.”
First the bad news.
During the so-called “binding period,” which is typically the first 30 to 60 days of your policy, depending on your state laws, your insurer is free to cancel at will, without offering an explanation. This period allows the insurer to investigate the accuracy of your application and decide if it wants to accept you as a risk.
The most common reason for a cancellation during the binding period is due to underwriting, says Kristofer Kirchen, president of Advanced Insurance Managers in Tampa, Fla. “Discovering an undisclosed driver, failure to provide requested information, and vehicles that do not meet coverage requirements are common,” says Kirchen.
Now the good news.
Once the binding period has passed, your insurer can cancel only for specific reasons. Reasons vary by state, but common ones include nonpayment, fraud or suspension of your license.
Regardless of whether you are shopping for a new policy or renewing your current one, you have rights when it comes to car insurance.
Most people know that you cannot be denied a policy due to your gender, ethnicity or religion. Though specifics can vary by state, beyond these basics there are other things you should never hear from a car insurance company.
1. We are denying your application but are not going to tell you why
Most states require insurers to explain why they are denying an application or not renewing a policy. If you feel the decision is based on incorrect information, you have the right to review your application and to make corrections and appeal the decision.
2. You cannot cancel your policy until the renewal date
You can compare car insurance quotes and shop for insurance at any time and are entitled to a refund of any unused premium. However, insurers do have the right to charge a penalty if you cancel before the expiration date.
3. You cannot change your coverage or policy limits until the renewal date
You can change your policy limits or coverages at any time, and if the changes result in a lower premium, you are entitled to a refund.
4. We are canceling your policy and not giving you any notice
Required notice will vary by state, but your insurer must give you written notice of a cancellation or non-renewal and the reason why. For instance, Texas requires 10 days’ notice while Massachusetts gives you 20 days. If you feel the cancellation is based on inaccurate information, you have the right to appeal.
If you experience a cancellation, look for a new policy immediately.
“A lapse of just one day can result in a penalty and a lapse will typically cause your rates to go up,” says Penny Gusner, consumer analyst with CarInsurance.com.
5. We cannot insure you because you have been denied by another insurance company
Insurers can look at a variety of factors when evaluating your application, but they cannot deny coverage based on the fact that you have been denied by another insurer.
6. We cannot insure you because you purchased from an assigned risk plan
Insurers cannot deny a policy because you were previously insured by an assigned high-risk plan for drivers convicted of DUI or other serious offenses.
7. We cannot sell you a policy because you are only buying the minimum required state limits
An insurer cannot refuse your application because you only want to buy the minimum amount of car insurance required by your state.
8. We cannot sell you a policy because you have a low credit rating
While insurers in most states consider your credit rating when setting your rates, they cannot deny coverage based solely on your credit rating.
9. We cannot sell you a policy because you are not paying in full
Most insurers offer a small discount if you pay the policy in full, but they cannot require it. You have the right to pay for your insurance in installments. Insurers are allowed to charge a fee for each installment. (One exception is if you have a policy attached to an SR-22, which is a form that your car insurance company must file with the state to show that you have obtained — and will maintain — certain auto insurance coverages.)
10. We don’t like something on your driving record but won’t tell you about it
Insurers consider many factors when calculating your car insurance rate, and your driving record is chief among them. However, insurers have to give you an explanation of how your DMV record affects their decision.
More on Insurance.com:
- How to Get the Lowest Car Insurance Quotes Possible
- 7 Ways Cheap Car Insurance Can Backfire
- Top 5 Reasons to Compare Car Insurance Quotes Online