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Car Insurance Cancellation Laws: When Insurers Can Drop You

July 26, 2017
Auto Insurance, Insurance
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Car insurance companies can’t go around canceling their customers’ policies for no reason in the middle of the policy period. State laws dictate when they can cancel coverage. These reasons typically involve problems with the customer, including:

  • Lack of payment
  • Revocation or suspension of a driver’s license
  • Lack of vehicle registration
  • Fraud, such as lying or unintentionally giving incorrect information on the insurance application about things that would have affected the policy price
  • Making a fraudulent claim

Here’s a look at auto insurance cancellation laws in the 12 most populous states.

Reasons car insurance policies can be canceled mid-term

StateNo paymentDriver’s license suspended or revokedNo vehicle registrationCustomer fraud on applicationCustomer makes fraudulent claim
California
Florida
Georgia
Illinois
Michigan
New Jersey
New York
North Carolina
Ohio
Pennsylvania
Texas
Virginia

Some states allow auto insurers to cancel policies within the first 60 days for any reason.

Auto insurance policies typically last six or 12 months. When the policy term is up, an insurer can choose not to renew it, meaning you’d have to find insurance elsewhere. There generally are separate laws regarding nonrenewal.

Here’s are the cancellation laws for the states listed above.

Notice of cancellation; Grounds

(a) A notice of cancellation of a policy shall be effective only if it is based on one or more of the following reasons:

(1) Nonpayment of premium.

(2) The driver’s license or motor vehicle registration of the named insured or of any other operator who either resides in the same household or customarily operates an automobile insured under the policy has been under suspension or revocation during the policy period or, if the policy is a renewal, during its policy period or the 180 days immediately preceding its effective date.

(3) Discovery of fraud by the named insured in pursuing a claim under the policy provided the insurer does not rescind the policy.

(4) Discovery of material misrepresentation of any of the following information concerning the named insured or any resident of the same household who customarily operates an automobile insured under the policy:

(A) Safety record.

(B) Annual miles driven in prior years.

(C) Number of years of driving experience.

(D) Record of prior automobile insurance claims, if any.

(E) Any other factor found by the commissioner to have a substantial relationship to the risk of loss.

Any insured who negligently misrepresents information described in this paragraph may avoid cancellation by furnishing corrected information to the insurer within 20 days after receiving notice of cancellation and agreeing to pay any difference in premium for the policy period in which the information remained undisclosed.

(5) A substantial increase in the hazard insured against.

(b) Modification of automobile physical damage coverage by the inclusion of a deductible not exceeding one hundred dollars ($100) shall not be deemed a cancellation of the coverage or of the policy.

(c) This section shall not apply to nonrenewal.

Source: California Code, Insurance Code – INS § 661

(2) No notice of cancellation of a policy shall be effective unless it is based on one or more of the following grounds:

(a) Nonpayment of premium.

(b) Material misrepresentation or fraud.

(c) The driver license or motor vehicle registration of the named insured or of any other operator who either resides in the same household or customarily operates an automobile insured under the policy has been under suspension or revocation during the policy period or the 180 days immediately preceding its effective date or, if the policy is a renewal, during its policy period. This subsection shall not apply to any policy which has been in effect less than 60 days at the time notice of cancellation is mailed or delivered by the insurer unless it is a renewal policy. Nothing in this subsection shall apply to nonrenewal.

Source: Florida Statute § 627.728

(c) No notice of cancellation of a policy issued for delivery in this state shall be mailed or delivered by an insurer or its agent duly authorized to effect such cancellation, except for one or more of the following reasons:

(1) The named insured failed to discharge when due any of his obligations in connection with the payment of premiums on such policy or any installment of premiums or the renewal of premiums, whether payable directly to the insurer or indirectly to the agent.  Notwithstanding the provisions of subsection (d) of Code Section 33-24-44, such notice of cancellation issued to an insured, who is paying on a monthly basis, may be included with the bill issued to the insured, provided that the bill is mailed to the insured at least ten days prior to the due date;

(2) The issuance was obtained through a material misrepresentation;

(3) Any insured violated any of the terms and conditions of the policy;

(4) The named insured failed to disclose fully, if called for in the application, his record for the preceding 36 months of motor vehicle accidents and moving traffic violations;

(5) The named insured failed to disclose in his written application or in response to inquiry by his broker or by the insurer or its agent information necessary for the acceptance or proper rating of the risk;

(6) The named insured made a false or fraudulent claim or knowingly aided or abetted another in the presentation of such a claim;

(7) The named insured or any other operator either resident in the same household or who customarily operates an automobile insured under such policy:

(A) Has, within the 36 months prior to the notice of cancellation, had his driver’s license under suspension or revocation;

(B) Is or becomes subject to epilepsy or heart attacks and the individual does not produce a certificate from a physician testifying to his unqualified ability to operate a motor vehicle;

(C) Has an accident record; a conviction record, criminal or traffic; or a physical, mental, or other condition which is such that his operation of an automobile might endanger the public safety;

(D) Has within a three-year period prior to the notice of cancellation been addicted to the use of narcotics or other drugs;

(E) Has been convicted or forfeited bail during the 36 months immediately preceding the notice of cancellation for:

(i) Any felony;

(ii) Criminal negligence resulting in death, homicide, or assault arising out of the operation of a motor vehicle;

(iii) Operating a motor vehicle while in an intoxicated condition or while under the influence of drugs;

(iv) Being intoxicated while in or about an automobile or while having custody of an automobile;

(v) Leaving the scene of an accident without stopping to report;

(vi) Theft or unlawful taking of a motor vehicle; or

(vii) Making false statements in an application for a driver’s license; or

(F) Has been convicted of or forfeited bail for three or more violations, within the 36 months immediately preceding the notice of cancellation, of any law, ordinance, or regulation limiting the speed of motor vehicles or any of the provisions of the motor vehicle laws of any state, violation of which constitutes a misdemeanor, whether or not the violations were repetitions of the same offense or different offenses;

(8) The insured automobile:

(A) Is so mechanically defective that its operation might endanger public safety;

(B) Is used in carrying passengers for hire or compensation; provided, however, that the use of an automobile for a car pool shall not be considered use of an automobile for hire or compensation;

(C) Is used in the transportation of flammables or explosives;

(D) Is an authorized emergency vehicle; or

(E) Has changed in shape or condition during the policy period so as to increase substantially the risk.

Source: Georgia insurance code § 33-24-45

Cancellation of Automobile Insurance Policy — Grounds

After a policy of automobile insurance as defined in Section 143.13(a) [215 ILCS 5/143.13] has been effective for 60 days, or if such policy is a renewal policy, the insurer shall not exercise its option to cancel such policy except for one or more of the following reasons:

a. Nonpayment of premium;

b. The policy was obtained through a material misrepresentation;

c. Any insured violated any of the terms and conditions of the policy;

d. The named insured failed to disclose fully his motor vehicle accidents and moving traffic violations for the preceding 36 months if called for in the application;

e. Any insured made a false or fraudulent claim of knowingly aided or abetted another in the presentation of such a claim;

f. The named insured or any other operator who either resides in the same household or customarily operates an automobile insured under such policy:

1. has, within the 12 months prior to the notice of cancellation, had his driver’s license under suspension or revocation;

2. is or becomes subject to epilepsy or heart attacks, and such individual does not produce a certificate from a physician testifying to his unqualified ability to operate a motor vehicle safely;

3. has an accident record, conviction record (criminal or traffic), physical, or mental condition which is such that his operation of an automobile might endanger the public safety;

4. has, within the 36 months prior to the notice of cancellation, been addicted to the use of narcotics or other drugs; or

5. has been convicted, or forfeited bail, during the 36 months immediately preceding the notice of cancellation, for any felony, criminal negligence resulting in death, homicide or assault arising out of the operation of a motor vehicle, operating a motor vehicle while in an intoxicated condition or while under the influence of drugs, being intoxicated while in, or about, an automobile or while having custody of an automobile, leaving the scene of an accident without stopping to report, theft or unlawful taking of a motor vehicle, making false statements in an application for an operator’s or chauffeur’s license or has been convicted or forfeited bail for 3 or more violations within the 12 months immediately preceding the notice of cancellation, of any law, ordinance, or regulation limiting the speed of motor vehicles or any of the provisions of the motor vehicle laws of any state, violation of which constitutes a misdemeanor, whether or not the violations were repetitions of the same offense of different offenses;

g. The insured automobile is:

1. so mechanically defective that its operation might endanger public safety;

2. used in carrying passengers for hire or compensation (the use of an automobile for a car pool shall not be considered use of an automobile for hire or compensation);

3. used in the business of transportation of flammables or explosives;

4. an authorized emergency vehicle;

5. changed in shape or condition during the policy period so as to increase the risk substantially; or

6. subject to an inspection law and has not been inspected or, if inspected, has failed to qualify.
Nothing in this Section shall apply to nonrenewal.

Source: Illinois code 215 ILCS 5/143.19

Cancellation; reasons.

Subject to the following provisions no insurer licensed to write automobile liability coverage, after a policy has been in effect 55 days or if the policy is a renewal, effective immediately, shall cancel a policy of automobile liability insurance except for any 1 or more of the following reasons:

(a) That during the 55 days following the date of original issue thereof the risk is unacceptable to the insurer.

(b) That the named insured or any other operator, either resident of the same household or who customarily operates an automobile insured under the policy has had his operator’s license suspended during the policy period and the revocation or suspension has become final.

Source: Michigan insurance code 500.3220

Notice of cancellation; reasons.

  1. (A) A notice of cancellation of a policy shall be effective only if it is based on one or more of the following reasons:

(a)Nonpayment of premium or nonpayment of a residual market equalization charge imposed pursuant to the provisions of section 20 of P.L.1983, c.65 (C.17:30E-8); or

(b)The driver’s license or motor vehicle registration of the named insured or of any other operator who either resides in the same household or customarily operates an automobile insured under the policy has been under suspension or revocation during the policy period or, if the policy is a renewal, during its policy period; or

(c)Knowingly providing materially false or misleading information in connection with any application for insurance, renewal of insurance or claim for benefits under an insurance policy; or

(d)The insurer determines, within 60 days of issuance of the policy, that the named insurer does not meet the approved underwriting rules of the insured then in effect.

Source: New Jersey statute 17:29C-7

(c) After a covered policy has been in effect for sixty days, or upon the effective date if the policy is a renewal, no notice of cancellation shall be issued to become effective unless required pursuant to a program approved by the superintendent as necessary because a continuation of the present premium volume would be hazardous to the interests of policyholders of the insurer, its creditors or the public, or unless it is based on one or more of the following:

(1) With respect to automobile insurance policies:

(A) nonpayment of premium, provided, however, that a notice of cancellation on this ground shall inform the insured of the amount due;

(B) suspension or revocation during the required policy period of the driver’s license of the named insured or any other person who customarily operates an automobile insured under the policy, other than a suspension issued pursuant to subdivision one of section five hundred ten-b of the vehicle and traffic law or one or more administrative suspensions arising from the same incident which has or have been terminated prior to the effective date of cancellation;  or

(C) discovery of fraud or material mis-representation in obtaining the policy or in the presentation of a claim thereunder.

Source: New York insurance law ISC § 3425

Certain policy cancellations prohibited.

(a) No insurance policy or renewal thereof may be cancelled by the insurer prior to the expiration of the term or anniversary date stated in the policy and without the prior written consent of the insured, except for any one of the following reasons:

(1) Nonpayment of premium in accordance with the policy terms;

(2) An act or omission by the insured or his representative that constitutes material misrepresentation or nondisclosure of a material fact in obtaining the policy, continuing the policy, or presenting a claim under the policy;

(3) Increased hazard or material change in the risk assumed that could not have been reasonably contemplated by the parties at the time of assumption of the risk;

(4) Substantial breach of contractual duties, conditions, or warranties that materially affects the insurability of the risk;

(5) A fraudulent act against the company by the insured or his representative that materially affects the insurability of the risk;

(6) Willful failure by the insured or his representative to institute reasonable loss control measures that materially affect the insurability of the risk after written notice by the insurer;

(7) Loss of facultative reinsurance, or loss of or substantial changes in applicable reinsurance as provided in G.S. 58‑41‑30;

(8) Conviction of the insured of a crime arising out of acts that materially affect the insurability of the risk; or

(9) A determination by the Commissioner that the continuation of the policy would place the insurer in violation of the laws of this State;

(10) The named insured fails to meet the requirements contained in the corporate charter, articles of incorporation, or bylaws of the insurer, when the insurer is a company organized for the sole purpose of providing members of an organization with insurance coverage in this State.

Source: North Carolina General Statute § 58-41-15

No insurer may cancel any automobile insurance policy except pursuant to the terms of the policy, and in accordance with sections 3937.30 to 3937.39 of the Revised Code, and for one or more of the following reasons:

(1) Fraud, concealment, or misrepresentation by the insured to the insurer of any material fact in the procurement or renewal of the insurance or in the submission of claims thereunder;

(2) Loss of driving privileges through suspension, revocation, or expiration of the driver’s or commercial driver’s license of the named insured or any member of the named insured’s family covered as a driver; provided that the insurer shall continue the policy in effect but exclude by endorsement all coverage as to the person whose driver’s license has been suspended, revoked, or has expired, if the person is other than the named insured or the principal operator;

(3) Nonpayment of premium, which means failure of the named insured to discharge when due any of the named insured’s obligations in connection with the payment of premiums on a policy, or any installment of such premiums, whether the premium is payable directly to the insurer or its agent or indirectly under any premium finance plan or extension of credit;

(4) The place of residence of the insured or the state of registration or license of the insured automobile is changed to a state or country in which the insurer is not authorized to write automobile coverage.

Source: Ohio statute 3937.31

An insurer may not cancel a policy except for one or more of the following specified reasons:

(1) Nonpayment of premium.

(2) The driver’s license or motor vehicle registration of the named insured has been under suspension or revocation during the policy period;  the applicability of this reason to one who either is a resident in the same household or who customarily operates an automobile insured under the policy shall be proper reason for the insurer thereafter excluding such individual from coverage under the policy but not for cancelling the policy.

(3) A determination that the insured has concealed a material fact, or has made a material allegation contrary to fact, or has made a misrepresentation of a material fact and that such concealment, allegation or misrepresentation was material to the acceptance of the risk by the insurer.

Source: Pennsylvania Statutes Title 40 P.S. Insurance § 991.2004.2004

Authorized Cancellation of Policies.

(a) An insurer may cancel an insurance policy only as provided by this section.

(b) An insurer may cancel any policy if:

(1) the named insured does not pay any portion of the premium when due;

(2) the insured submits a fraudulent claim; or

(3) the department determines that continuation of the policy would result in a violation of this code or any other law governing the business of insurance in this state.

(c) An insurer may cancel a policy, other than a personal automobile insurance policy, if there is an increase in the hazard covered by the policy that is within the control of the insured and that would produce an increase in the premium rate of the policy.

(d) An insurer may cancel a personal automobile insurance policy if the driver’s license or motor vehicle registration of the named insured or any other motor vehicle operator who resides in the same household as the named insured or who customarily operates an automobile covered by the policy is suspended or revoked. An insurer may not cancel a policy under this subsection if the named insured consents to an endorsement terminating coverage under the policy for the person whose license is suspended or revoked.

Source: Texas Insurance Code § 551.104

No insurer shall cancel a policy except for one or more of the following reasons:

  1. The named insured or any other operator who either resides in the same household or customarily operates a motor vehicle insured under the policy has had his driver’s license suspended or revoked during the policy period or, if the policy is a renewal, during its policy period or the 90 days immediately preceding the last effective date.
  2. The named insured fails to pay the premium for the policy or any installment of the premium, whether payable to the insurer or its agent either directly or indirectly under any premium finance plan or extension of credit.
  3. The named insured or his duly constituted attorney-in-fact has notified the insurer of a change in the insured’s legal residence to a state other than Virginia and the insured vehicle will be principally garaged in the new state of legal residence.

Source: Virginia insurance code 38.2-2212

Dealing with your own cancellation

If you think your auto insurance has been canceled unfairly, contact your state insurance department. It can help you understand the state’s laws. You can file a complaint through the department if your policy was illegally canceled.

If you have a cancellation on your record, expect to face much higher rates when you shop for a new policy.

» MORE: What to do if you lose your car insurance