Can Auto Insurance be Reinstated after Cancellation?
A happy trip to the mailbox can quickly turn into a bad day if you receive a letter from your auto insurance company saying that your policy is going to be canceled. Or worse yet, you’re on vacation when this letter was sent out, and you don’t even open it before the deadline day. Can your policy be reinstated?
What do These Words Mean?
Before we get to that answer, it’s important to consider what some of these words actually mean. It’s important to remember that an insurance policy is a contract, a legally binding document. Therefore, like all good legal documents that get examined in court, the exact meaning of words is important.
There are essentially two ways that an insurance company can drop you as a customer. One is to “cancel” your policy, which basically means that they’ve picked a date in the near future to end your policy. The only way they can legally do this is if you’ve “breached the contract.”
The second way that an insurance carrier can drop you is through nonrenewal. This means that the company will allow your policy to run its course, all the way through the end of the policy period. Then, instead of getting a new policy from that company, you will simply be out of insurance and will need to find another policy.
So, back to the cancellation letter. Why would a company think that you have “breached the contract” and choose to cancel you? By far the most common breach is by not paying premiums. Because a policy is literally a contract, this means that the insurance company will only offer you coverage in return for your money, or premium. If they don’t receive any premium money, they are not legally obligated to insure you, so they won’t. Insurance companies are not charities, they are for-profit businesses, so they will not offer their services without paid premiums.
What’s the Big Deal About Cancellations?
Why is it even such a bad thing if you are sent a cancellation letter? Can’t you just get a new policy with the same company? First of all, you might still owe the insurance company money. If you do, and they still send you that cancellation notice, it is easy for you to think that the case is closed and you don’t have to pay.
The cancellation letter will tell you if you still owe them money, but it is also very easy to stop reading the letter after you see what it is. If you owe the insurance company money and you don’t pay, they will turn the bill over to a collection agency.
In addition, there are other consequences of having a canceled auto policy. You could lose your home/auto discount if you currently are getting one through the same company. It is also possible to lose your homeowners policy altogether, even though it’s your auto policy getting canceled.
You’ll need to pay real close attention to the dates. If it’s been 6 months since your policy was canceled, you will not be able to reinstate. You will need to get a new policy with a company that is okay with taking customers whose prior policies were canceled. If you can’t reinstate your policy with the same company, then you’ll need to be sure to have an active policy in place before your original policy cancels. Otherwise, you will have a lapse in coverage and be at risk of paying any damages completely out of pocket.
The last potential consequence of having a policy cancel is losing your insurance in a standard market. Before insurance carriers write new policies, they want to know what your previous insurance history is and will typical going back anywhere from 3-5 years. If you’ve been canceled before, it’s possible that a standard insurance company will not accept you right now. This means that you might need to get a policy through a non-standard carrier, which basically just means a lot higher auto insurance premiums.
Is Reinstatement an Option?
Can all of this be avoided? Can you reinstate your policy? The murky answer is: it depends. It depends on why you’re being canceled. If it’s for nonpayment of premium, you will typically have until the very last date stated in the cancellation letter to be able to pay your premium. If you do, the company will likely reinstate you. The only extra thing you would have to do is sign a Statement of No Loss, which just says you haven’t had any claims since you last paid.
Other factors depend on how long you’ve been with the company, if you have any other policies with them, if you’ve been canceled before, and your payment history. If the cancellation reason was for something other than nonpayment, for example, if you broke the law or got a DUI, there won’t be anything you can do to reinstate. At that point, you’ll need to get a policy through a non-standard company.
Reinstating a canceled auto insurance policy is possible but depends on many factors. Whether you can reinstate your previous policy or not, make sure that you get a new policy in place if your previous one does cancel. You don’t want to be out on the roads without auto insurance!