Cancellation vs. nonrenewal: What happens to your car insurance policy?

Key takeaways

Policy cancellations and nonrenewals terminate your car insurance coverage. The main differences are why the insurer is ending your policy and when it can happen.

What’s the difference between cancellation and nonrenewal?

A nonrenewal happens at the end of the policy term, while cancellation occurs during the policy period. Car insurance companies can choose to nonrenew a policy with an explanation, depending on the state. A cancellation is more severe and insurers will usually need a legitimate reason for cancellation if the policy was in-force for more than 60 days.

Unless your policy was canceled for nonpayment, the insurer must refund you any prepaid premiums promptly, such as within 30 to 60 days, but laws vary by state.

Policy cancellation vs. nonrenewal

Car insurance companies have more leeway when it comes to acceptable reasons for not renewing a policy compared to canceling a policy. Insurers can only cancel a policy for specific reasons that depend on your state’s laws. But either you or the insurance company can decide to not renew a policy. And you can cancel your own policy any time.

Why would an insurer cancel or not renew a policy?

There are several reasons an insurer might nonrenew or cancel a car insurance policy, such as nonpayment. You must be sent a notice of nonrenewal or cancellation.

Reasons for policy nonrenewal

An insurer can decide to nonrenew your policy at the end of the term if you:

Your policy could also be nonrenewed for a reason that has nothing to do with you personally. For example, the insurer might be nonrenewing policies in your area because it wants to leave the market.

Reasons for policy cancellation

Within the first 60 days of a car insurance policy, insurers can cancel coverage for nearly any reason, provided the grounds for cancellation aren’t against the law, such as a reason that’s discriminatory, retaliatory or otherwise illegal.

After the 60 days, an insurer can only cancel a policy midterm if you:

A misrepresentation can also mean you were dishonest about where you park or garage your car, according to Cheryl Wild-Donde’Ville attorney and partner at Waltzer Wiygul Garside & Wild. One example is if you give the insurer the address of a slightly better neighborhood, so your garaging location is better.

“That would be a material misrepresentation. Any sort of thing that you put on your application that is not true, they could use to cancel it,” she says.

Policy-cancellation notice requirements by state

What happens if your policy is canceled or not renewed?

If your policy is canceled or nonrenewed, you could see higher rates when you buy coverage elsewhere, depending on the reason for the policy termination. For example, if you made multiple recent claims, insurers might deem you high risk and charge higher rates. That said, you still have a few options.

Contact your insurance company

You might be able to resolve the issue with your insurer depending on the reason it dropped you. For instance, if you only missed one payment, the insurer might let you pay the funds and keep coverage. Or if you made a mistake on the application, you might explain why there was an error.

If you think the reason is unfair or unlawful, you can contact the insurance company’s consumer affairs division. You’ll need to provide proof of why the cancellation or nonrenewal was unjust.

You can also file a complaint with your state insurance department if you believe the cancellation was unlawful.

Shop around

Just because one insurance company will no longer sell you a policy doesn’t mean no insurer will cover you. Shop around for car insurance quotes to see who will offer you a policy at a good price.

Plus, if your current insurer canceled or nonrenewed your policy solely because you made a claim—which you are owed according to your policy contract—you might be better off with a different company anyway, says Jeff Butler, a public adjuster and president of Collison Consulting.

Use a high-risk insurer if you have to

If you’re deemed high-risk to insure, such as having speeding tickets or a DUI conviction, there are likely still plenty of insurers that will insure you.

There are also car insurers that specialize in high-risk car insurance. For example, The General sells auto insurance for drivers who might have a hard time getting insurance elsewhere because you:

Assigned-risk plans for auto insurance

States provide last-resort car insurance programs, often known as assigned-risk plans. Each auto insurer in the state is required to take a certain number of assigned-risk customers, based on the insurer’s size of business in the state.

To get auto insurance through an assigned-risk plan, you must work with a licensed insurance agent or broker in your state. They will complete the application for you and submit it to your state’s assigned-risk pool. Expect high premiums if you buy auto insurance through the assigned-risk plan.

Depending where you live, you might only be able to get the state minimum-coverage requirements through an assigned-risk plan. And you typically must meet eligibility rules. For example, in Texas, you’re only eligible if you were rejected by at least two auto insurance companies in the past 60 days.

Find your state’s assigned-risk plan

How can you avoid car insurance cancellation and nonrenewal?

You can lower the chance of a policy cancellation or nonrenewal by: