State laws require car owners to carry liability insurance for their vehicles but they do allow auto policy issuers to cancel those policies under certain circumstances that are not always clearly defined. In most states, driving without liability insurance is considered to be a criminal offense punishable by severe fine or worse and leaving the driver personally responsible for damages and injury to others. Whether standard, premium rate or low price car insurance, dropped coverage can happen to anyone.
There are numerous reasons why your auto insurance coverage may be dropped by your carrier. Although some of the reasons are obvious, some are not. Also, some of the circumstances that can lead to dropped coverage are within the control of the policy holder while others are purely at the discretion of the insurance company.
After your policy goes into effect, the carrier has up to sixty days to decide to continue or to cancel the policy. In fact, the insurance company can cancel coverage any reason it chooses and is not obligated to tell you why. In all but a few cases, after that initial period has passed the carrier will continue to honor the coverage for the term of the policy. When the term of auto policy expires, the carrier has the option of continuing coverage for another term of dropping coverage. In that situation the policy issuer does have an obligation to provide a reason for the dropped coverage and to inform the policy holder about the appeal process that exists in his state.
As previously mentioned, the carrier can choose to drop your low price car insurance or your premium coverage many different reasons. You can prevent dropped coverage for the two most common reasons simply by following this advice. First, always pay your premium on time and in full. Nonpayment or partial payment of policy premiums is the most common cause of dropped coverage. By avoiding this pitfall, you will greatly reduce your chances of losing your auto coverage. In rare circumstances, the carrier may let you "catch up" on past-due payments and reinstate coverage, but don't count on that happening.
Lying on you auto insurance application is the other most common cause of dropped coverage. Something as seemingly innocent as saying that you park your car in a garage when you don't, or claiming far fewer average driving miles that you actually put on you car can result in cancellation of a policy when you need it most.
Be honest on your application. Drive carefully and make a claim only when absolutely necessary and you will probably never have to deal with the loss of your car insurance.