The terms cancellation and non-renewal have two different meanings when it comes to your auto insurance. Both mean you will ultimately no longer have auto insurance with the carrier sending notice, but there are different issues associated with each.
What is a cancellation?
A cancellation happens in the middle of your policy period and can only happen for very specific reasons. The main reason for a cancellation is non-payment of your policy premium. When your payment is late, your insurance company will typically send you a notice of intent to cancel your policy with a cancellation date on it. If the payment is not received by the date on that notice, your policy will be cancelled. You may or may not, based on your driving record and previous payment history, be able to convince your insurance company to reinstate your policy. If they will not reinstate, you’ll have to find coverage with another company.
The other reason you might be cancelled mid-term is because of a misrepresentation on your application. It is incredibly important for you to be upfront and honest about your driving history and legal driving status. Your insurer will need to know if you’ve ever had a DUI/DWI, suspension, or other major moving violation(s). The company does have the right to cancel your policy, within a certain period of time, if they find you lied on your application.
What is a non-renewal?
A non-renewal isn’t as harsh as a cancellation. Non-renewals are often issued because the insurance company no longer wants your business. But it isn’t personal. Non-renewal notices are always issued within 30-60 days of a policy renewal date, so you have plenty of time to find new coverage.
Changes to your driving record are one reason your policy may be non-renewed. While minor accidents and moving violations usually result in an increase in premium, major incidents may prompt your company to drop you as a customer.
Some states simply allow insurance companies to non-renew a small percentage of their business for what seems like no reason at all – like having too many customers in one geographic area. This has nothing to do with you at all and should not impact your ability to get a policy with another company.
Regardless of the type of notice you receive, prompt action is important. Talk to your agent about finding new insurance right away. The longer you wait, the more difficult it may be to find a reasonably priced policy before your existing policy term ends.