Five words you don't want to hear from your auto insurer are: "Your policy has been canceled." Finding out your insurer has decided not to renew your auto insurance policy is no picnic, either. However, the difference between cancellation and nonrenewal can mean the difference between an inconvenient insurance future and a downright unpleasant one.

Most state laws specifically spell out the circumstances under which an auto insurer can cancel your policy. These are the most common grounds for cancellation:

• You or a member of your household lose driving privileges during the policy period because of license suspension, revocation, or expiration.
• You fail to pay your premium on time.
• You misrepresent material facts about your risk — meaning your driving history, claims history or the number of people who have access to your vehicle.

Auto insurers can cancel your policy at any time if you've committed one of these "cancellable offense," but they must give you written notice of the cancellation. State laws vary on the number of days' notice an insurer must give you before the cancellation takes effect, but expect an insurer to give you between 10 and 30 days notice. In the notice, the insurer must tell you why it has decided to cancel your car insurance policy.

What's more, an auto insurer has the right to cancel your policy at any time and for any reason during the "binding period" — the time frame after your application in which the insurer determines your risk. The binding period is typically 60 days. When an insurer cancels a policy during the binding period, it usually means that it has found a blemish on either your driving record or credit record that makes you an unacceptable risk.

Cancellation is like a dark cloud

After an insurer has canceled your auto policy, you may find it difficult to purchase auto insurance from another company. If you've been cancelled for not paying your premium on time, you might be able to get your insurance reinstated with the same insurer if you otherwise have a good record. But many insurers now require that you pay the full annual premium upfront if you have a history of missing premium payments. And many insurers flee from recently or previously canceled policyholders because cancellation points to a bad risk. In fact, some auto insurers ask prospective policyholders if they've been canceled within the last three to five years because they generally don't want to sell insurance to those people.

If you find that your policy has been cancelled and the insurer is not willing to reinstate it, you will need to look elsewhere for coverage. There are some auto insurance companies willing to sell policies to high-risk policyholders — at a higher price.

Nonrenewal less restrictive

Auto insurers can nonrenew your policy only when it comes up for renewal, and state laws do not always spell out the offenses for which an insurer can nonrenew policies.

Nonrenewal simply means your insurer no longer wishes to sell you insurance, usually because you've made too many claims for at-fault accidents, were convicted of driving under the influence, or received too many traffic citations during the last three to five years. These offenses will no doubt raise your insurance premium from your next insurer, but they don't make you an auto insurance pariah.

When an auto insurer decides not to renew your policy, it must send you a notice. State laws vary, but an insurer normally must give you between 10 and 30 days' notice of nonrenewal. The notice of nonrenewal might contain the reason the insurer has decided to drop your policy, but it might not. If the reason for nonrenewal is not included in the notice and you want it, you'll have to send a written request to the insurer.

A silver lining?

Little good can come from an insurer canceling your auto insurance policy, except perhaps for your reimbursement check. If an insurer cancels your auto insurance policy, you can expect to receive a check for the amount of premium you paid that did not purchase coverage. For example, if your six-month policy costs $600, you pay it in full at the beginning of the insurance period, and your insurer cancels your policy after four months, you will get back $200 for the two months the insurer does not cover you. However, that's small consolation given the "cancellation cloud" that will hang over your auto insurance future.