Breaking up with your auto insurance company -- and how to move on
Ending a relationship can create a combination of feelings like frustration, confusion, anger, anxiety or, on a positive note, freedom. But when your relationship with your auto insurance company comes to an end, it might cost you some dough and could affect your standing with your next provider, regardless of who's responsible for the breakup.
When your insurer breaks up with you
When an auto insurance provider wants to end things, it usually comes in the form of a notice of cancellation or nonrenewal. Whether it's a cancellation or nonrenewal notice you receive, start searching for a new provider immediately.
Cancellation means termination of coverage during the life of the insurance policy. According to the Insurance Information Institute, an insurance company cannot cancel a policy that has been in force for more than 60 days unless:
- You do not pay your premium.
- You have committed fraud or misrepresented yourself in your application.
- Your driver's license has been revoked or suspended.
If you receive a notice of nonrenewal, it means your insurance provider will not continue coverage after your current policy expires.
According to the Texas Department of Insurance, a company cannot refuse to renew your policy unless it has been in effect for at least 12 months. If you initially bought only six months of coverage, your company must stick it out for another six months so that you have a full year of coverage. Texas law also requires your insurance company to give you 30 days' notice if it plans to refuse to renew your policy after the end of those 12 months.
When you break up with your insurer
When the tables are turned and you're the one ending the relationship, put it in writing. Your bank account and credit report could be affected if you don't give your insurance provider enough notice.
If you try to dump your auto insurance company by ignoring it, this tactic could backfire. Even if your policy term is about to end, it doesn't mean you can terminate your policy by simply stopping payments. According to Edmunds.com, your jilted insurance company will automatically bill you in advance for the next term's premium if you fail to send a notice of cancellation. The insurer will cancel your coverage if you don't pay, thus dinging your credit.
By giving your insurance provider a written notice of cancellation in advance, you can avoid penalties and demonstrate to your new provider that you'll adhere to your new contract agreement.
Your motive behind leaving your auto insurance provider might be to get a lower premium with another company, but be sure to review your insurance contract beforehand. It may include a short-rate cancellation fee.
According to Oregon's Department of Consumer and Business Services, this short-rate provision may require you to pay a penalty for early cancellation to cover what an insurance company spent on you in the beginning of the relationship -- in other words, the costs it incurred in issuing the policy. If your policy contract does not include a short-rate provision, you'll be reimbursed for a portion of any premiums you paid in advance.
Regardless of who ends the relationship, it's important to find a new insurer immediately. You don't want to violate your state's financial responsibility laws or be held personally liable if you're involved in an accident. You might even consider looking around before the breakup to see what's out there and obtain insurance quotes from several auto insurance providers. Just make sure your new coverage kicks in before your old coverage ends.
If your insurance company sends you a notice of cancellation or nonrenewal that you think is unfair or if you want a further explanation, the Insurance Information Institute suggests calling your insurance company's consumer affairs division. If you're not satisfied with the explanation, call your state's insurance regulator.