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Your car insurance company may cancel your policy for a few different reasons. Once this happens, the cancellation can stay on your record for several years and affect your insurance coverage going forward. And it often raises your costs in the long run. Here's what to know about canceled car insurance and what to do if this has happened.
How Does Policy Cancellation Affect Your Insurance Record?
If your car insurance company cancels your policy, the information can stay on your motor vehicle record for three to five years. During this time, insurers may consider you a high-risk customer and can charge you higher premiums to mitigate any risk you pose.
Insurance companies can cancel coverage for a variety of reasons. For instance, this may happen if your license is suspended, you fudged the details on your insurance application or if you don't pay your premium on time. Once the insurer notifies you of the cancellation and any grace period expires, you'll no longer be covered. It's illegal to drive on public roads in most states until you get a new insurance policy.
Your former insurance company should send details about the cancellation to your state's department of motor vehicles. The information can appear on your motor vehicle record for three to five years. If you apply for a new car insurance policy within this time frame, the new company can access your record and use it to determine your eligibility for a policy and the rate you pay.
What if You Cancel the Policy?
As the policyholder, you can cancel your car insurance policy anytime. For instance, you may decide to cancel coverage with one insurance company because you found a lower rate elsewhere. Make sure the effective date of the new policy lines up with the cancellation date of your old one. As long as you have no gaps between the start dates, you won't have negative marks on your driving record.
How Canceled Car Insurance Affects Future Insurance Coverage
A canceled insurance policy on your driving record can affect your future insurance coverage in several ways:
- Difficulty finding coverage: When you have a canceled insurance policy on your driving record, it may cause you to appear as a high-risk customer. Insurance companies may deny you coverage as a result. Shopping around is one way to find affordable coverage. You can contact companies directly or use a tool like Experian's auto insurance comparison tool to find coverage that meets your needs and fits your budget.
- Higher rates: If you do find a company willing to write you a car insurance policy, it may charge you more because of your increased risk. High-risk drivers may pay up to 80% more for car insurance, making the average insurance premium for a high-risk driver around $3,500 per year.
- Driver's license and registration suspension: After a cancellation, your state's department of motor vehicles may suspend your license and registration until you've regained coverage. The license suspension—on top of the cancellation—could make it harder to find coverage and may cause you to pay higher rates.
- SR-22 form: If your policy is canceled and you're caught driving without insurance, your state will require you to buy a new policy. The new insurer will need to file an SR-22 form or FR-44 form on your behalf. Sometimes known as SR-22 insurance, this type of policy is usually more expensive than standard coverage.
A canceled policy can affect you in other ways too. For instance, your state may charge you a fee when your policy lapses or fees to reinstate your registration and driver's license. And if you lease or finance your vehicle, the lender may repossess the car if your insurance coverage lapses.
Details about your canceled policy may stay on your driving record—and affect your coverage—for up to five years. But once the information clears, the negative effects typically go away.
How to Navigate a Canceled Policy in Your Record
It's possible to avoid the worst effects of having a canceled insurance policy on your record. Here are some options to check out:
- Work with a specialty insurer. If you can't find coverage with a standard insurer, you may be able to get coverage through a state program. For instance, the Massachusetts Automobile Insurance Plan assigns state residents to an insurance company that will provide insurance to you for up to three years.
- Reduce your coverage to lower costs. If your new auto insurance policy is expensive, lowering the coverage limits or removing extras like roadside assistance can help reduce your premium.
- Shop around. The price of car insurance can vary greatly from one company to the next. Shopping around and comparing rates from multiple insurers is the best way to find affordable coverage.
- Take a defensive driver course. These classes are designed to teach drivers how to control their vehicles when encountering unexpected situations. Completing the course may help you earn a policy discount because it shows the insurer that you've learned to be a safer driver.
- Look for other discounts. Your insurance company may offer a menu of discounts that help lower your premium. For instance, you may save money when you bundle policies at the same company, enroll in a program that tracks how safely you drive or show that your car is equipped with safety features.
The Bottom Line
A canceled car insurance policy can make it harder to get coverage as long as the mark stays on your record—usually three to five years. In the meantime, the cancellation can drive up your rates.