5 Surprising Reasons Your Auto Insurer Will Drop You
Many reasons exist as to why an auto insurer might decide to cancel or not renew your policy, and some of the most common ones — such as failing to pay your premium, committing fraud, or having your license suspended— are not surprising to most drivers.
But here are five lesser-known catalysts for nonrenewal or cancellation, some of which may be shocking to the average consumer.
1. Filing frequent claims, regardless of who was at fault
Even one auto insurance claim most likely is going to raise red flags and cause a spike in your premium. Where things get really troublesome, however, is when a driver files more than one claim in less than two years.
“Having one accident is bad, but having multiple accidents is really bad,” says Kevin Lynch, assistant professor of insurance at The American College in Pennsylvania. “Even if they weren’t your fault in the slightest, an insurer will almost certainly not renew your policy if you’re involved in multiple accidents over a short period of time.”
And accidents aren’t the only culprit. Filing multiple claims following extreme weather events, theft or vandalism can also be cause for non-renewal. Given this reality, Lynch suggests drivers think carefully about whether or not they should file a claim.
“You need to look at the economics of filing a claim,” Lynch says. “If you have $700 in damage to your car and a $500 deductible, are the consequences of that claim really worth $200? Probably not. But if you totaled your new $40,000 pickup, then you really have no choice.”
2. Medical conditions
Tom Simeone, a Washington, D.C., personal injury attorney who specializes in insurance, says insurers in many states are legally allowed to deny coverage or mark a policy for nonrenewal if a driver develops a health problem that makes him or her unsafe to drive. Various forms of seizure-inducing epilepsy are most often to blame, but Simeone says drivers with a high risk of heart attack, unstable diabetes, severe arthritis and even chronic depression should also be concerned.
“In these situations the insurer may require you to obtain a certificate from a doctor that says your risk of a seizure or heart attack is low, or that you are otherwise a low risk,” Simeone says.
Lynch is quick to point out, however, that an insurer will not deny a claim or drop coverage if you get into an accident as a result of a medical condition you didn’t know you had.
“The insurer assumes that if you’ve got a valid license you’ve been cleared to drive by your state,” Lynch says. “So as long as you’ve got insurance your claim is going to be covered. Of course they very well may not renew the policy when the term of the contract is up, but that’s up to the insurer and individual state laws.”
3. Moving to a different state
If you have to relocate don’t assume your insurance policy will follow you. Not all insurance companies do business in all 50 states, which means you might have to switch insurers before changing your address. This can become a hassle if you’ve filed a claim sometime in the past three years, even if you had a previously spotless driving record.
For instance, let’s say you’ve lived in the same town for 30 years. Your driving record is clean and you’ve never filed a single claim. Then you get into an accident or receive a moving violation on year 31.
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Because you’ve been with the same insurance company for so long, Lynch says you’re probably going to be OK. They’ll most likely reward your loyalty by keeping you as a customer and maybe even forego raising your premium for this first offense.
“But then you have to move the following year, and your current insurer doesn’t cover your new home state. Well now you need to apply for a new policy, and that accident or ticket you got into a year ago may cause new insurers to balk at your application,” Lynch says.
4. Not disclosing significant changes to your vehicle or drivers
Insurance companies want to know specifically who will be driving the vehicles garaged at your home. If you’re not upfront about this Simeone says they may deny a claim or cancel your policy.
“For example, you could be in trouble if you fail to add a teenage driver to your policy, loan the vehicle for an extended period of time to someone who is not on your policy, or you house the vehicle in a different location than what’s on your application,” Simeone says. “All of these change the risks for the insurance company and therefore may result in coverage being denied or a policy cancelled.”
The best advice, Simeone says, is to fully disclose to your insurance company any significant changes related to your vehicle or its drivers. Yes, you’re probably going to pay a higher premium, but it’s better to shell out the extra cash now than lose coverage when you need it most.
5. Substance addiction or criminal record
Simeone says some insurance companies will deny insurance or revoke an insurance policy if someone has been an addicted user of drugs or alcohol within the past three years. What’s more, some insurers are hesitant to issue policies to convicted felons, especially if the criminal record resulted from a driving offense.
“Even if you only have one accident on your record, if it resulted in a conviction for criminal negligence through the use of an automobile, that may be enough for an insurer to refuse coverage or cancel your policy,” Simeone says.