What Is Non-Renewal? How Do You Avoid It?
Last Updated on May 19, 2021
If your car insurance company no longer wants your business, then you may receive a non-renewal notice.
With non-renewal, your car insurance company has decided not to renew your policy upon expiration. After your car insurance policy expires, your policy will not be automatically renewed. You will either have to stop driving or find another insurer.
Today, we’re explaining everything you need to know about non-renewal, how it works, and how to avoid it.
What Is Non-Renewal on Car Insurance?
Non-renewal on car insurance means your current insurance company no longer wants your business.
If you have multiple at-fault accidents in a three-year period, for example, then your insurer may give you a non-renewal notice, alerting you that your policy will not be renewed.
Non-renewal is similar to cancelation: your car insurance company no longer wants your business. However, the two terms are technically different.
Non-Renewal: Your insurance policy will not be renewed upon expiration. This may occur if you are too high risk or have multiple incidents in a short period of time.
Cancelation: Your insurance policy will be canceled immediately. This may occur if you have committed insurance fraud or a similarly serious violation. Your insurer is also legally obligated to notify you of policy cancelation.
Why Non-Renewal Occurs
Non-renewal typically occurs for one of three reasons:
Bad Driving Record
If you have two or more at-fault accidents within the past three years, then your insurer might assign a non-renewal status. Insurance companies might also do this for DUIs, excessive speeding tickets, or several other serious violations in a short period of time. Standard insurance companies might not insure high-risk drivers. As an individual with multiple violations in a short window, you are considered a high-risk driver, which means you might need to buy from a high-risk auto insurance company.
Too Many Claims
If you have multiple claims within a short period of time, then your insurer could issue a non-renewal notice. Generally, most insurers issue a non-renewal if you have three at-fault claims within a three-year period. If you caused three accidents within a three-year period, then your insurer may not want your business.
Moving to a New State
Some insurers only operate in certain states. If you are moving to a new state, then your insurer may issue a non-renewal notice because your insurer doesn’t operate in that state.
Note: Your policy may be renewed because of the actions of another driver on your policy. Your insurer considers the driving record of your roommate, spouse, children, and any other person of driving age living at your household. These people may be listed on your policy, and their actions could lead to non-renewal even if your record is otherwise clean. If you have received a non-renewal notice for no obvious reason, then it may be related to the actions of another driver in your household.
Contact Your Agent or Insurer After Receiving the Non-Renewal Notice
Your insurer may have issued a non-renewal notice in error. Sometimes, a claim was registered in the database incorrectly, pushing you into non-renewal status even when your policy should be active.
For that reason, it’s important to contact your insurer after receiving a non-renewal notice. Ask your insurer why your policy will not be renewed. It’s possible a mistake was made.
It’s also possible your non-renewal is related to another driver on your policy. Your spouse may be considered a high-risk driver because of a string of recent accidents, for example, but your status hasn’t changed. Your policy has a non-renewal status until you exclude that person. Once that person is excluded from your policy, your car insurance is back to normal.
Start Your New Policy on the Day of Cancelation
If your policy has legitimately entered non-renewal status, then you need to find a new insurance company.
Sometimes, you can compare quotes as normal, choosing a new insurer by comparing quotes online.
In other cases, you are a high-risk driver who must now work with a high-risk insurance company. You will pay higher premiums because you are more likely to make a claim.
After you select a new insurance company, you must start your new policy on the same date your old policy expires. Your old policy expires at 12:01 AM on the date of cancelation. If you start your new policy the next day, then your car insurance will lapse for one full day. This leaves you without insurance for a one-day period, although a car insurance lapse can have other effects on car insurance rates (leading to higher rates in the future, for example).
To avoid penalties and issues, make sure your new car insurance policy is activated on the same day your old policy ends.
How to Avoid Non-Renewal
Non-renewal on car insurance is serious. It could mean higher insurance premiums in the future. It could also mean you’re a higher-risk driver for the next few years.
Fortunately, you can take certain steps to avoid non-renewal.
The best way to avoid non-renewal is to limit the number of claims you make – especially if you already have two claims within a three-year window.
If you have multiple claims within the last three years, then you should reconsider making another claim – especially if it’s a minor accident.
If you hit the side of your garage pulling into your house, for example, then you could report this to your insurance company as an at-fault collision, and your insurer could cover the cost of repairing the damage. Or, you could pay for repairs out of pocket and avoid having the incident appear on your record.
This isn’t an option for all insurance claims. If you caused a serious accident with multiple injuries, for example, then you’ll want to report that incident to your insurer. Your insurer should still cover the incident and your liability, then your policy will enter non-renewal status.
The other way to avoid non-renewal is to exclude a driver from your policy. If you have a high-risk driver in your household, then that driver could be dragging down your insurance rates or impacting your premiums. When you exclude that driver from your policy, you prevent that driver from driving your car – but you also prevent that driver from impacting your insurance coverage.
You can also avoid non-renewal by driving more carefully. An at-fault accident could push your insurance into non-renewal territory. Drive more cautiously to lower your risk of an at-fault accident.
Final Word on Non-Renewal
If you receive a non-renewal notice from your insurer, then it may be time to find a new insurance provider.
Typically, you receive a non-renewal notice after multiple accidents, citations, or other incidents within a brief period. Some insurers issue a non-renewal notice if you have three or more claims within three years, for example.
To avoid non-renewal, consider paying for the damage out of pocket instead of filing a claim – especially if you have two or more incidents on your record within the last three years.