Cancellation vs. Non-Renewal of Auto Insurance

Under typical circumstances, a driver will have his or her auto insurance coverage for the term listed on the policy and will then receive the option to renew that policy when it is about to come to term. Normally, the relationship between policyholder and insurer ends when the policyholder chooses not to renew, whether it is because the insurer has increased rates, because the policyholder is unhappy with service, or some other reason. However, the insurer can also end the relationship in one of two ways, non-renewal or cancellation. While both methods mean the end of the auto insurance policy, it is very important to distinguish between the two.

Non-renewal

Once the term of an auto insurance policy ends, the insurer may decide not to renew. If the insurance agency is not going to renew your policy, it must give you sufficient notice so that you can obtain a new auto insurance policy elsewhere without experiencing an interruption in coverage. How much notice the company must give you will depend on the state in which your vehicle is located.

Non-renewal does not necessarily indicate any negligence or breach of faith on the part of the insured. An agency may choose not to renew your policy simply because they are no longer offering the specific type of policy the driver holds, or because the company has decided to reduce the amount of policies they offer in your state or in the driver's part of the state. A non-renewal by itself should not affect a driver's ability to get a competitive premium from another company.

Cancellation

The cancellation of an auto insurance policy is a more serious matter. An auto insurance company cannot cancel a policy without cause, meaning a cancellation must be the result of misrepresentation or fraud on the part of the driver. If the auto insurance company has offered a policy or premium based on information that the insured has intentionally provided which is inaccurate, the company may cancel the policy immediately. If this happens, it may make it very difficult for the driver to get another policy.

Since auto insurance is generally required by law, such misrepresentation or fraud can mean a revocation of driving privileges for the individual providing the fraudulent information. This makes it extremely important to answer any questions on an insurance application as completely and honestly as possible.