Did you know that your car insurance can be cancelled and you’ll simply be notified by mail? It happens more often than people think. For all sorts of reasons, insurers face an increasingly competitive market with low profit margins. That means some are cancelling policies whenever they have a legal right to do so. But it’s not just about profit margins. Many insurers cancel policies when they’re legally obligated to do so or when they think the policy-holder has become a high-risk client. Here are six main reasons an auto insurance company may cancel your policy:
You Move and Don’t Tell the Insurer
If you move, sell your car or do anything else that can be considered a “material” change in your situation, a car insurance company can usually cancel your policy immediately. If you simply forget to call the insurer and inform them of your new address, they might cut you some slack and keep your policy in force.
You Don’t Pay
Business is business. If you don’t pay your premium, your policy will lapse. Companies are good about giving notice, so if you get a letter saying something like, “Your policy is about to be terminated,” call the insurer and pay up immediately.
Your License Gets Suspended
If you don’t have a license, for whatever reason, it’s against the law for an insurance company to offer you a policy or to keep one in effect. After a suspension, expect a letter saying, “Your policy has been cancelled.”
You Lied on Your Application
If you misrepresented any material fact on your insurance application, the company can cancel you as soon as they find out. Depending what that fact is, the insurer might not even need to give you notice. Note that in most cases of cancellation that don’t involve crimes or lying on your part, an insurer must give you 30 days’ notice.
You Make a Claim That is Shown to be Fraudulent
If a court or the insurance company’s investigators have good reason to believe that you have committed fraud while filing a claim, your policy will be automatically cancelled. The really bad news is that a cancelled policy will be the least of your problems if you commit insurance fraud, which is a felony punishable by more than a decade in prison.
Your Vehicle is Not Registered
Insurers run afoul of federal laws when they continue to cover vehicles that are not registered to be on the roads. If you were to cause an accident in a non-registered car as an insured motorist, the company might be legally liable for any damage you caused. That’s why insurers will automatically cancel any policy as soon as they learn that the vehicle you drive in not properly registered in your state. In fact, if you look at the fine print in the original policy, there will be wording to the effect that, “… this policy does not cover unregistered vehicles.” Thus, it’s a de facto cancellation for non-registered vehicles. The “cancellation letter” to you is a mere formality.