So you use your tax refund as a down payment on a new car,
or at least one new to you. You get the new car; you get
your new, affordable car insurance policy in writing;
you're good to go. Unfortunately, at some point down the
road you may receive a notice that your policy will become
ineffective in X number of days (it varies from state to
state). It's important to understand exactly why the policy
is expiring because it means the difference between a mere
inconvenience and payback for an event you can't seem to
live down.
Let's start with the best-case scenario. If you're lucky,
the going rate for the coverage you have is still good, and
your insurance company will offer a renewal at the same
rate. On the other hand, the insurance company may change
its mind. Sometimes an insurer will agree to renew your
policy, but on different terms. In such cases, the carrier
is required to mail you notification of the change in
terms, usually received 60 or 90 days before your policy
expires. Usually, if the rate is below 25 or 30 percent,
state law does not require this type of notification.
On the other hand, the insurance company may choose to
simply drop you from its client list. Don't take it
personally—sometimes non-renewals are the result of
an insurance company withdrawing its business from a whole
state or area of insurance. Other reasons include lapses in
payment or an increase in your license points or reported
claims. The company must justify dropping you, as well as
give you ample notice before the policy expires and repay
you for services or coverage not rendered. Note that for
some companies, merely calling to inquire about company
policy counts as a claim, so for heaven's sake, don't give
your name when making this type of call. Keep in mind that
only some companies allow for a grace period between policy
periods if you don't pay by the expected deadline, so pay
on time or risk being "dropped."
But, just suppose, you fudged a little bit when you were
filling out your policy application, and you knew it when
you were doing it. There's a difference between getting it
wrong, and tweaking your application to your advantage. The
latter can result in policy cancellation, which is when a
carrier simply terminates your policy, even if it's before
your renewal date or the policy's expiration. The good news
is that the company still must repay you for the remainder
of the policy you paid for; the bad news is that you might
have a bit of a time finding another company to cover you.
Here again, the company must give you notice, so that you
can start working on finding new coverage before the policy
actually expires. Unfortunately, the notice period is not
usually as generous as that for non-renewal. Other reasons
for cancellation include nonpayment, as well as undeclared
crimes or egregious at-fault events (accidents), even in a
no fault auto insurance state.
Remember, most state laws require insurance companies to
provide policies to all drivers, even if it's at the high
price of high-risk auto insurance. So, chin up—it's
not as bad as it could be.
----------------------------------------------------
Ryan Patterson is president of US Insurance Online, based
in Austin, TX. He graduated in 2000 from the University of
Texas with a combined business and computer science degree,
and started US Insurance Online in May of 2005 with fellow
entrepreneur Jim Waltrip. Visit
http://www.USInsuranceOnline.com for help shopping for
insurance and for free insurance quotes.
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