An auto insurance policy is a legally binding contract between an insurance company and the person who buys the policy, commonly called the “insured” or “policyholder.” In exchange for payment of a specified sum of money (called a “premium”), an insurance company agrees to pay for certain types of loss or damage as specified by your contract.

Why Do I Need Auto Insurance?

Your automobile is a valuable asset which could be very expensive to repair or replace if is damaged. Part of what auto insurance does is to pay for the repair or replacement of a vehicle which is damaged either as a result of your driving or from other causes not related to driving, such as theft or storm damage. Auto insurance also covers your legal liability which could arise if you injure another person or damage another person’s property with your vehicle.

How Long Do Most Auto Insurance Policies Last?

Most auto insurance policies are issued for a stated policy “term”, such as six months or one year. Any limitation on cancellation applies only during the policy term. Once your policy has reached the end of its term, insurance companies can usually decide to discontinue or decline renewal of your policy for any reason not prohibited by law.

Can An Insurance Company Cancel My Policy For Any Reason It Chooses?

Once an auto insurance policy is issued, an insurance company cannot cancel it except for reasons specifically stated in the policy. State laws usually limit what a company can include in the “cancellation” provisions of its policies. Some justified reasons for cancellation of an auto insurance policy by an insurance company include:

  • Failure by a policyholder to make required premium payments
  • The policyholder has committed some type of serious misrepresentation or fraud
  • Suspension or revocation of a policyholder’s driver’s license
  • Policyholder intentionally causes an automobile accident

Must My Insurance Company Notify Me If It Plans To Cancel My Policy?

In most states, an insurance company must give the policyholder a written notice of at least 30 days prior to the end of the policy term if it does not intend to renew an automobile insurance policy.

My Insurance Company Has Unfairly Cancelled My Auto Insurance Policy – Do I Need An Attorney?

Dealing with your insurance company can be an arduous task. If your insurance company cancels yours policy before its term expires and does not have a justifiable reason for doing so, then you should retain an attorney. Automobile insurance policies can be extremely detailed and difficult to read. An experienced insurance attorney can explain the policy’s complex legal terms and inform you whether you have a case.