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It’s rare for an insurance company to drop you after a claim — providers can cancel or opt to not renew your coverage, but they must provide notice.
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Rashawn Mitchner is a MarketWatch Guides team editor with over 10 years of experience covering personal finance, loans, insurance and warranty topics.
Key Takeaways:
Auto insurance companies rarely cancel coverage after one accident. However, an insurance company can drop you after a claim if you have a pattern of causing accidents, filing excessive claims or not paying your premium on time.
In this article, we at the MarketWatch Guides Team will explain how and when an insurer can cancel your coverage and what you can do to avoid it. We’ll also provide recommendations for the best car insurance companies to help you decide which are the most reliable.
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The short answer is yes, your insurance company can cancel your policy at any time. The longer version is that it’s highly unlikely that your insurer will drop you after one claim. Many states have regulations against insurance companies dropping clients with no warning. In Florida, for instance, state law requires an insurance company to provide at least 45 days of notice that a client’s policy will be canceled.
There are certain instances in which an auto insurer can cancel your insurance policy. In the sections below, we’ll look at the most common reasons providers use to drop a client.
In most cases, insurance companies can cancel your policy within the first 60 days without providing a specific reason. Some states have exceptions to this rule, however. New York state, as an example, requires insurers to provide a reason for cancellation during the first 60 days.
Many insurance providers will drop a driver that’s been convicted of a driving under the influence (DUI) or driving while intoxicated (DWI) offense. Providers tend to view those with DUIs on their records as higher risk, which can lead to the driver’s policy being canceled. If the insurer decides not to drop a high-risk driver, having a DUI can result in much higher insurance premiums.
If you can’t legally drive any longer, an insurer may cancel your auto insurance policy. This could stem from a suspended driver’s license due to a DUI or other major driving infraction, or from a health issue that affects your ability to drive safely.
The term “insurance fraud” covers a wide range of infractions both large and small, usually referred to as “hard” or “soft” fraud. Instances of hard insurance fraud are large infractions, such as faking an accident to receive a claims payout, filing multiple claims for one accident or falsely claiming a car was stolen. Soft fraud typically refers to lies by omission on insurance applications, lying about the source of a damage or exaggerated damages to gain bigger payouts.
If you’re filing a large number of insurance claims during your policy term, especially after a number of at-fault accidents, you may receive a cancellation notice from your provider. Too many claims reads as high-risk behavior, and once an insurer views you as too high a risk to cover, it may decide to drop you as a customer.
Having an excessive claims history could hurt your ability to find cheap car insurance from a new insurer.
Missing a payment here and there won’t necessarily cause your insurance provider to drop your coverage, but you may be hit with late payment penalties. Most insurance companies offer a grace period of 30 days to remit payment.
If late or missed payments become a pattern, the insurer may cancel your policy, as it can’t be sure you’ll actually pay your premium. Essentially, too many late payments makes you a riskier client to insure.
While it’s unlikely for an insurance company to drop you after a claim, your car insurance policy will probably undergo some changes.
The most common occurrence after filing a claim is a higher car insurance premium. The increased amount is usually expressed in a percentage, which varies from company to company. Typically, higher premiums resulting from an accident stay on your policy for three years.
Below is a table illustrating how much auto insurance rates increase after an at-fault accident.
A policy cancellation is different from an insurance non-renewal. Insurance companies can cancel your policy with no notice within the first 60 days of the policy term. After those 60 days, most states require insurers to provide both you and your insurance agent with notice of the intention to drop your coverage. In most cases, providers must give at least a 30-day notice, but laws differ from state to state.
A non-renewal is different from an insurance cancellation because it allows a policyholder to remain covered for the entirety of the policy term. Once that term expires, the provider doesn’t offer the option to renew. In the event of a non-renewal, you’ll likely need to purchase a new policy from a different auto insurance company as soon as possible to avoid a lapse in coverage. In some cases, you may be able to file an appeal with your provider to reverse its decision.
The insurer must give you notice and reasoning behind its decision to not offer renewal. Sometimes a non-renewal has nothing to do with your driving record. A company may simply decide to stop offering a certain kind of insurance product.
The easiest ways to avoid cancellation or non-renewal are to drive safely and pay your insurance premium on time. The lower your risk to an insurance company, the less likely it will drop you.
It’s not common for an insurance company to drop you after filing a claim. If your claim stems from an accident for which you’re found at fault, you’ll likely see an increase in your insurance premium. To avoid being dropped by your insurance company, practice safe driving habits and be sure to pay your premiums on time and in full.
When shopping for auto coverage, we recommend comparing car insurance quotes from several providers. This way, you’re able to get a better sense of what’s available for your budget and insurance needs. We’ve found USAA and State Farm to be two of the top providers on the market.
Based on our research, we found that USAA offers some of the lowest car insurance rates in the industry. However, it’s important to note that USAA coverage is only available to members of the military, veterans and their families. The company provides solid add-on coverages like accident forgiveness, rental reimbursement and roadside assistance. USAA also offers car replacement assistance, which will reimburse you 20% over your car’s value in the event of a total loss.
Read more: USAA insurance reviews
State Farm is the most popular auto and home insurance provider in the nation. The company is especially known for its low rates for young drivers thanks to its good student discount and telematics insurance program. State Farm has over 19,000 local agents around the country (except for Massachusetts and Rhode Island), which means you’re highly likely to find a State Farm agent in your area.
Read more: State Farm insurance reviews
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There is no limit on the amount of insurance claims you can file, but most experts say filing more than one claim per year could result in an insurance company canceling your policy. It’s best to avoid filing multiple claims in one year.
An insurance company can drop you for a number of reasons. Most commonly, insurers will cancel or opt not to renew coverage for drivers who file an excessive amount of claims. Drivers who are convicted of a DUI, perpetrate insurance fraud or fail to pay their insurance premium can also face being dropped.
Insurance companies can drop you for any reason within the first 60 days of the beginning of the policy, but they must provide notice before doing so. After the 60-day period of time, it’s more difficult for an insurer to cancel your coverage. State laws differ on the matter, but providers must offer notice of cancellation or non-renewal no matter what.
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.
Here are the factors our ratings take into account:
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*Data accurate at time of publication.
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