How to get on your car insurance company's bad side

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It pays to stay on your car insurancecompany’s good side. Insurance is a contract: You agree to pay your premium and drive safely, and the car insurance company agrees to cover damages if you cause an accident.

So how can you get on your car insurance company’s bad side?

You misrepresented yourself on your application. For example, if you said that you park every night in a locked garage but you actually park on the street.
You file a fraudulent claim.
Your driver’s license is revoked or suspended.

Those are the obvious ways. While car insurance companies can’t just drop customers willy-nilly, most states allow them to drop people for a variety of other reasons.

Car insurance companies don’t need your permission to drop you. Generally, during the first 60 days of a new policy, your insurer can cancel your coverage without providing any reason. During that two-month period, the insurance company is reviewing your record and deciding if it wants to accept the responsibility of insuring you. If you want to find out what the acceptable cancellation reasons are where you live, contact your state department of insurance.

Then the rules change

After the initial “getting to know you” period, car insurance companies need valid reasons to cancel your policy. In addition to nonpayment and fraud, many states allow auto insurance companies to cancel your policy if your license is suspended or revoked. They can also cancel your policy if the driver’s license of someone in your household is suspended or revoked. Some states require that insurers maintain coverage if you agree to exclude coverage for the offending individual.

There are other ways you can get on an insurance company’s bad side.

In addition to losing coverage because of too many accidents, it’s also likely you’ll lose your insurance if you get a drunk driving charge, since most states automatically suspend your license for a serious offense like that. If you don’t lose coverage altogether, consider yourself lucky, but your rates are likely to increase.

In California, car insurance companies can cancel you for nonpayment, fraud, misrepresentation or a “substantial increase in the hazard insured against,” according to the California Department of Insurance Web site. That typically means you’re letting other people drive your car on a regular basis without telling your insurance company.

In Illinois, they can cancel your policy if they learn you:

Violated the terms or conditions of the policy.
Didn’t disclose all your accidents and tickets on your application.
Are subject to epilepsy or heart attacks and cannot produce a physician’s certificate attesting to your ability to drive.
Have other physical or mental conditions that make you dangerous behind the wheel.
Were addicted to drugs in the last three years.
Were convicted of a felony or forfeited bail for a felony.
Were convicted of criminal negligence resulting in death, homicide or assault as a result of operating a motor vehicle.
Drove under the influence, were intoxicated in the vicinity of a vehicle you were in custody of, drove away from the scene of an accident without reporting it, or stole someone else’s car.

Driving a junker or a vehicle loaded with flammables?

Most states allow insurance companies to carefully consider the condition of your vehicle and how it’s being used when deciding whether to renew your policy or to cancel it. For instance, your insurer generally may cancel your policy after 60 days if it learns that your vehicle failed a state inspection, you’ve altered it inappropriately or you’re using it for business purposes (like to transport employees, flammables or explosives).

Many states also spell out when auto insurance companies cannot deny you coverage. In Texas, they can’t refuse to renew your policy due to accidents that weren’t your fault (unless you have two or more in one year) or for damage caused by weather or wild animals.

Some states also prevent auto insurance companies from refusing coverage based solely on your age or your credit record. In New York, auto insurance companies can’t refuse to renew a policy just because you’re over age 60. An insurer can’t drop you just because they severed ties with your agent or broker.

In Illinois, auto insurance companies can’t cancel you solely for claims resulting from hate crimes committed against you in the past five years. They also can’t refuse coverage because of age, gender, race, color, creed, ancestry, occupation, marital status, employer or physical handicap.

If your insurer decides to cancel your policy for non-payment, it usually must mail a notice at least 10 days before the cancellation date. If auto insurance companies are cancelling you for other reasons, they generally have to give you more notice — anywhere from 20 to 45 days.

In many states, you have a right to a detailed explanation of what factors prompted the company to drop you.

What are your options if you’re cancelled?

If your auto insurance company notifies you that it is dropping your coverage, you have several options:

Contact your insurance agent and find out how you can be reinstated.
Contact competing companies to get car insurance rate quotes.
If you’re having trouble finding a company that will insure you, contact an insurance company that specializes in the “nonstandard auto market” for high-risk drivers.
If no one else wants to insure you after your policy cancellation, investigate insurance through your state’s high-risk car insurance pool. Expect these rates to be high.

In some states, such as Illinois, you can appeal the cancellation or nonrenewal to the state department of insurance.

Whatever you do, act quickly. Auto insurance companies look at the length of any policy lapse and may charge more if the gap is lengthy. Not to mention that driving without insurance is illegal in most states.

Penny Gusner

Contributor

Penny is an expert on insurance procedures, rates, policies and claims. She has extensive knowledge of all major insurance lines -- auto, homeowners, life and health insurance. She has been answering consumers’ questions as an analyst for more than 15 years and has been featured in numerous major media outlets, including the Washington Post and Kiplinger’s.