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Can an auto insurance company cancel a policy after just one claim?

By Insurance.com Posted : 01/01/2011

First, understand the difference between cancellation and nonrenewal. An insurer can't cancel a policy that's been in effect for more than 60 days unless you don't pay the premium or you've lied on the application or committed fraud, according to the Insurance Information Institute.

However, the insurer can decide not to renew the auto insurance policy once the term expires. Some states require insurers to give a certain amount of notice and explain the reason behind the nonrenewal decision. In other states, insurers can simply walk away from the deal.

If you think you've been treated unfairly, call the insurance company's customer service department, and if you're still unsatisfied, contact your state's insurance department and ask it to look into the matter.

Increasing the car insurance premium

It's unlikely an insurer will choose not to renew a policy because of just one claim, but it may increase the premium. The increase is called a surcharge and it can remain in effect for a few years.

The amount of surcharge companies attach to premiums varies. This is why it's important to ask about companies' surcharge policies when comparing auto insurance rates. Although one company might advertise the lowest rates initially, it might not offer the best deal once a surcharge is factored in if you get in an accident. Some companies offer "accident forgiveness" so you don't get a premium hike for the first accident you cause.

Although a single claim may not prompt nonrenewal, a series of claims and traffic tickets could push an insurer to drop you at renewal time. Clean up bad driving habits to keep safe, maintain a good relationship with your insurer and keep car insurance rates low.

For more, see "Hasta la vista, baby: 5 reasons your insurance will be terminated."

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