What Happens When Your Car Insurance Is Canceled

Insurance companies must notify you in writing 10 to 30 days before canceling your policy. The notice explains the reason, the cancellation date and your options. A few situations commonly trigger cancellation:

• Non-payment: Not paying your bill by the due date is the most common reason insurers cancel coverage.
• Suspended or revoked license: Insurers can't legally cover a driver without a valid license, so cancellation follows automatically.
• Too many violations or accidents: If your driving record makes you too high-risk to insure, the company can drop your policy.
• False or incomplete information: You provided inaccurate information or didn't provide the requested documents, and your car insurance was canceled.
• Medical disqualification: Companies will cancel your auto insurance if you are diagnosed with a health condition that could make driving unsafe.

Reinstatement means your car insurance policy becomes active again. It's possible if your policy was canceled for certain reasons that can be fixed easily. Reinstatement is usually faster and may be cheaper than getting a new policy.

• What is a grace period? A grace period is the time between a missed payment and actual car insurance cancellation date. Most insurers offer 10 to 30 days. During the grace period, you may still be covered, but if you don't pay before it ends, your auto policy cancels.
• When reinstatement works: For non payment cancellation issues, most insurers let you reinstate car insurance within 30 days of if you pay the full balance and any fees. For false or incomplete information, contact your insurer, provide the missing documents or explanation, and request policy reinstatement.
• When reinstatement doesn't work: If your license was suspended or revoked, you can't reinstate car insurance until your license is restored. Contact your state DMV and complete all their requirements. If you had too many violations, accidents or claims, most insurers won't reinstate. You'll need to shop for new car insurance, possibly from a company specializing in high-risk drivers.

If you car insurance has been canceled, it's important to reinstate your policy or buy a new policy before you old one expires. We mentioned above you won't be able to legally drive, but a gap in car insurance coverage creates problems that cost money and other hassles: 

• License and registration suspension. Your state will eventually suspend your driver's license and vehicle registration if you have a canceled policy.
• Higher insurance costs. Even one day without car insurance after a cancellation can increase your future rates. Drivers with gaps in coverage pay about 10% more annually than those with continuous coverage.
• SR-22 requirement. If your car insurance was canceled due to driving record issues, you may need to submit an SR-22 form to prove you have insurance. This is proof of coverage, not insurance. You get it from your state's DMV usually for about $20.
• Force-placed insurance: If you financed or leased your car, your lender requires active insurance coverage. If you don't get insurance after the cancellation, the lender will force-place insurance on your car. Force-placed coverage is far more expensive (around 2-3X).

Depending on the reason, you may be able to appeal. Contact your state insurance commissioner's office to file a complaint if you believe the cancellation was unfair or violated your state's insurance laws. But it may not be worth the hassle  or time it takes to appeal because it's fast an easy to buy a new car insurance policy

Car insurance cancelation and non renewal sound similar but have different impact to your future car insurance rates. Car insurance cancellation happens during your policy period. Your insurer actively ends your car insurance due to something you did (missed payment, accidents, etc.). A non renewal happens at the end of your policy term. Your insurer decides not to continue the car insurance policy or you choose not to renew. Non renewal doesn't impact your future rates like a car insurance cancelation does.

Car insurers have been leaving certain states like California due to higher risk.  If your car insurer leaves the state, this is a non renewal, not a car insurance cancellation and you will need to shop for a new policy.