You may find yourself in this situation: you asked for a car insurance quote and the insurance company refused to give you one. Or maybe your insurer just let you know that your policy is canceled or that it will not be renewed. So, you may be wondering: can car insurance companies deny coverage?
In short, the answer is yes. Car insurance companies can deny coverage for a variety of reasons and it all boils down to the level of risk that they associate you with. Read on to discover the reasons why your car insurance application may be denied, and what to do to prevent this from happening.
When can car insurance companies deny coverage?
Car insurance companies pay for damage that results from a set of covered risks. But because insurance companies are businesses, and you pay a premium that is way lower than the cost of that damage, they make money by “betting” on the unlikeliness of that damage to happen. In other words, the more risk you present as a driver and car owner to cause a damage, the more difficult you will be to insure. That means that your insurance will be more expensive or insurance companies may deny you coverage altogether.
Car insurance coverage may be denied if you:
- Have too many accidents that were your fault
- Have too many moving violations such as speeding tickets or a DUI
- Are a young new driver
- Have a long lapse in coverage (you haven’t driven in years and didn’t need insurance)
- Own a fast and expensive car that is more likely to be crashed, stolen, or vandalized
- Live in a neighborhood with high crime, where your car is more likely to be stolen or vandalized
- Have a poor credit record
A serious offense like a DUI or multiple accidents can be enough for an insurance company to deny you coverage. While for the other reasons, the denial is often not based on one reason alone, but on a combination of two or more.
When car insurance companies can’t deny you coverage
You generally cannot be denied coverage for the following reasons:
- Marital status
- Sexual orientation
Moreover, in some states like Texas, car insurance coverage cannot be denied solely on the basis of your credit score. Insurers who use your credit score must also consider other factors when deciding whether to offer you coverage.
Auto insurance denial vs. cancellation vs. nonrenewal
We already know, you can apply for car insurance for a first time (or after a long period of time) and be denied. But what if you already have car insurance and you lose it? This too can happen, in two ways: your insurer cancels your policy or decides to not renew it.
Auto insurance policy cancellation
In the state of Texas, in the first 60 days of your policy, your insurance company can cancel it for any reason. Beyond the first 60 days, there are only a few reasons for which your insurer can cancel your car insurance policy.
- You didn’t pay your premiums on time or at all
- You committed fraud (you lied in your insurance application in order to get the policy)
- Your driver license or car registration was suspended or revoked
- The driver license of a household member who usually drives a covered car on the policy is suspended or revoked (you can avoid this by excluding that person from the policy)
- You filed a fraudulent claim
- Texas Department of Insurance determines that the continuation of the policy would result in insurance law violation
One thing you should know is that your insurer cannot cancel your car insurance policy from one day to the next. In Texas, insurance companies must notify the policyholder at least 10 days prior to policy cancellation.
Auto insurance policy nonrenewal
Your insurer may decide to not renew your policy after the current term ends. The reasons are similar to the ones for cancellation. Other reasons for nonrenewal may be:
- You filed multiple claims
- You moved to another state
Speaking of claims, in Texas, your insurance company cannot refuse to renew your [car insurance] (internal link to car insurance service page) policy for:
- claims for damage resulting from weather (hail, wind, flood) or contact with animals or fowls
- claims for damage caused by flying gravel or flying objects
- towing and labor claims
- claims for any other accident that was not your fault (unless you have two or more claims in one year)
Moreover, if your insurer decides not to renew your auto insurance policy, they must notify you in writing at least 30 days before your policy expires.
Laws in different states may be similar or slightly different, so do your research properly and know your rights before buying your auto insurance policy.
What to do if a car insurance company denies you coverage
Being denied coverage from a car insurance company is an unpleasant situation but there are solutions to the problem.
Shop around using an insurance agency
Different insurance companies may have different criteria when deciding whether to offer coverage. Your best bet will be shopping around. Use an independent insurance agency (like us!) that will be able to look for solutions with several insurers. It will save you time and get you the best possible rates for your situation.
Consider high-risk insurers
Can’t get coverage from the most common, low-cost insurance companies? Look for insurers that specialize in coverage for high-risk drivers. Some of the major insurance companies will have subsidiaries that sell high-risk auto insurance. Keep in mind, high-risk insurance will also cost you more than a typical car insurance policy.
Try to get added on someone else’s policy
If you couldn’t get car insurance because you are a new driver, ask a family member or a roommate to add you on their policy. Generally, car insurance companies only let people who live together share a policy. If you want to share a car insurance policy with someone that doesn’t live with you, that person must be a direct family member such as a parent or a child. For example, if you’re a new driver who just went off to college, you can be added to your parents’ policy even if you no longer live with them.
Seek state assistance
If all your applications for car insurance from private insurers are denied, you can seek state assistance. In Texas, you have the right to purchase minimum liability, personal injury protection, and uninsured motorist coverage through the Texas Automobile Insurance Plan Association, also known as TAIPA, if at least two insurance companies denied you coverage.
Per Texas state law, after 3 years of no at-fault accidents or traffic violations, you have the right to get coverage from an insurance company as a regular policyholder at a price lower than the rate TAIPA offers.
Improve your driving record
Let’s face it: a bad driving record is often the reason why you may be denied car insurance. This means that the long-term solution to the problem will be to avoid causing accidents and to not commit any traffic violations.
Even if you consider yourself an experienced driver, it is not a bad idea to go to a safe driving school, as this will increase your chances to be able to get insurance afterwards.
In Texas, a speeding ticket will be on your record for 3 years. Certain eligible individuals may obtain a dismissal of speeding tickets and other traffic citations by taking a defensive driving program. Check with your court if you are eligible. If you are, you can complete the program online, in a classroom, or by purchasing a video.
Of course, your high-risk status will not disappear overnight. But as years go by you will see that your premiums will get lower and the effort will pay off.
Improve your credit score
If your poor credit score was one of the reasons you got denied coverage, the long-term solution is to improve your credit score. Here are some simple ways to achieve this goal:
- pay your bills, your loans, and your credit cards on time
- don’t use up more than 30% of your available credit, and pay off any debt that exceeds this percentage
- dispute any errors on your credit record
Consider getting a safer car
Last but not least, you can reduce your high-risk status by simply driving a safer car. It will be less “fun” to drive, but together with other factors, it will improve your eligibility for car insurance. And it will save you money in the long run because your premiums will be cheaper.
Can car insurance companies deny coverage or cancel your policy? Yes, they can. Is it unpleasant? Yes. Is it a desperate, un-fixable situation? No. Qualifying for auto insurance coverage and for the best rates is often in your power, as a driver and car owner. It is quite unlikely that you get denied coverage for reasons that are completely out of your control.
But if you have trouble finding auto insurance, or if the rates you are offered are higher than you might expect for your situation, your first action should be contacting an independent insurance agency.
By not being tied to any specific insurance company, an independent agency (like us!) can objectively analyze your situation and shop around for you from a multitude of insurers. No matter your situation, we can help you find the right way to fix it!