Being dropped from your auto insurance provider's coverage not only feels horrible, but it can also place you in a financially precarious spot. Going without auto insurance, even for a brief period, can expose you to fines, out-of-pocket expenses, and higher premiums after finding another provider.
If you're wondering how and why your auto insurance coverage was canceled, check out these three common reasons.
1. Filing Too Many Claims in a Short Period of Time
Accidents happen, but being involved in multiple accidents in a short period of time can spell trouble for your insurance policy. Insurance providers issue policies based on a customer's calculated risk. In the eyes of your insurance provider, filing more than one claim in a single year could make you look too risky to insure, even if you have legitimate claims.
When it comes to multiple claims in a short time span, most insurance companies opt for non-renewal instead of outright cancellation. This means your insurance policy will remain valid, but it won't be eligible for renewal at the end of the term. You should start looking for new coverage as soon as you receive your non-renewal notice.
2. Being Convicted of a Serious Driving Offense
Racking up one too many moving violations within a short period or being convicted of driving while intoxicated (DWI) or driving under the influence (DUI) can lead to more than just a suspended license. These offenses could also lead to your insurance provider canceling your policy. After all, most insurance companies are reluctant to insure such high-risk drivers on ordinary policies, if they choose to insure them at all.
If your insurance policy is canceled due to a serious driving offense, your only option is to find another provider that specializes in insuring high-risk drivers. These policies are significantly more expensive, but a few years of driving safely without racking up any moving violations should help lower your premiums eventually.
3. Closure of Your Local Insurance Provider
If you get your auto insurance through a well-established national provider, then you usually won't have to worry about the company suddenly going belly-up. Locally owned and operated insurance providers, on the other hand, are another story. Businesses can and do fail for a variety of reasons. If your insurance provider throws in the towel, that could leave you and countless others suddenly without insurance coverage.
The best way to shield yourself against this is to check your insurance provider's background and ratings carefully. Your state's department of insurance will have detailed information about your insurance provider, including its financial rating, complaint history, and current license status.