You likely have to buy and keep a car insurance policy. If you don’t, you’ll likely violate your state’s laws, and will probably face penalties. Still, how do you know if you are at-risk of losing your coverage? Does your insurer have to inform you? How can you make sure you know if your car insurance might lapse?
In many cases, your car insurer will notify you if you they might have to cancel your policy. However, to extend your benefits of knowing beforehand, consider buying a Notice of Cancellation policy endorsement. When you get this coverage, you will have more of a guarantee that you never enter a period where your policy ends and you have no coverage.
Why Insurers Cancel Policies
If an insurance company cancels your car insurance policy, they might do so because of a variety of triggers. Some of these might include:
- You failed to pay for your policy.
- You did not update your policy to reflect your current vehicle, meaning it no longer applies.
- The insurance company might decide to no longer offer the policy you currently carry. As a result, they might need you to transition to a new policy.
- Sometimes, you represent a very high cost risk to the insurer. As a result, they might not be able to afford to cover you. Therefore, they might have to cancel your policy. You might have to buy a new policy from them or from another insurer.
- If you have received certain driving penalties, like SR-22s, then you might have to update your policy to new coverage. The new policy will better reflect your risk level and coverage needs.
Additionally, car insurance policies are not permanent. Eventually, they will expire, and you will have to renew coverage, or get a new policy.
All insurers vary in when they will cancel coverage. However, most policies will list these situations on your coverage. They will also list if and how much notice they will give you before they cancel or do not renew your coverage. When the insurer warns you of an impending policy termination, this is a notice of cancellation.
The Problems with Policy Cancellations
Texas, along with most states, requires drivers to carry certain amounts of car insurance. The state wants all driver to have coverage. Therefore, if you go without a policy, you will leave yourself exposed to potentially-heavy costs of car accidents. Lack of coverage might not only affect you, but also your insurer and those harmed by accidents that are your fault.
That’s why it is so important that you always carry coverage. When you fail to do so, your insurer will likely view you as a very high risk to insure. They might even refuse to re-issue you a new policy if you try to re-apply after a lapse in coverage. If they do accept you, then you might have to pay considerably more for your coverage.
Why You Receive Notices of Cancellation
In an effort to help you avoid a policy cancellation, your insurer might send you a notice of cancellation. Most insurers, though sometimes not all, send these notices as a courtesy or to meet an obligation required of them by law. The notice will usually list why your policy will end and when the termination will take place.
However, insurers often have leeway in how soon they must notify you of a policy cancellation. Some might be able to notify you with as little as ten days to spare to review your policy. In some cases, if you fail to pay your premium, your insurer might even be able to cancel your coverage without notice.
All the same, you can take steps to make sure you always know if your insurer plans to terminate your policy. Ask your agent if you can buy a policy endorsement called a notice of cancellation rider.
The Benefits of a Notice of Cancellation Endorsement
A notice of cancellation policy endorsement will guarantee that your insurer will tell you if your policy is at-risk of cancellation. Your policy will likely say how far in advance that your insurer must notify you of a policy cancellation. However, by adding a notice of cancellation endorsement, you can extend this timeframe.
So, for example, your policy might say that your insurer will notify you within 30 days in advance of a policy cancellation. By getting a notice of cancellation rider, however, you might be able to extend this warning period to 60 days. The endorsement might also guarantee that all parties insured under the car insurance, like your spouse or children, will receive these notices, too. You might also be able to expand the scenarios where the insurer must notify you of cancellation.
How your insurer can address notices of cancellation will depend on a variety of factors, including Texas law. Therefore, if you want to get more notice, talk to one of our agents at (800) 282-2000. We’ll help you understand how and when you can expand your policy’s notice terms to preferable levels. You will likely be glad you got help in the end.
Also Read: Your Vehicle and Garage Security