What your car insurance company can't do
It may seem like car insurance companies have all of the power, but they actually have to follow strict laws regarding issuing and canceling policies and setting rates. While state laws differ, there are some basic things a car insurance company simply can’t do.
Below, we’ll outline 10 things your car insurance company can’t get away with.
1. Deny an application for car insurance without providing a reason
Most states require insurers to explain why they are denying an application or non-renewing a policy. If you feel the decision is based on incorrect information, you have the right to review your application and to make corrections and appeal the decision.
2. Prevent you from canceling at any time
Whether you want to switch car insurance companies or have another reason for canceling, your insurance company can’t stop you. You can also change your policy limits or coverage at any time and are entitled to a refund if the changes result in a lower premiumThe payment required for an insurance policy to remain in force. Auto insurance premiums are quoted for either 6-month or annual policy periods..
3. Change your rates in the middle of the term
Although you can change your coverage at any time, which can result in a change of premium, your insurance company can’t change your premium mid-term after the binding period. Any changes to your premium have to be made at renewal, even if you got a ticket in the middle of the term.
4. Cancel your policy for no reason or without notice
Insurance companies have a short binding period during which they can cancel your policy for several reasons. "Discovering an undisclosed driver, failure to provide requested information and vehicles that do not meet coverage requirements are common,” says Kristofer Kirchen, president of Advanced Insurance Managers in Tampa, Florida.
After that time, the list of cancellation reasons becomes much shorter, and the insurance company generally must wait until renewal to nonrenew your policy instead (refuse to renew it), which they can do for a variety of reasons.
However, they must have a legally permitted reason, and they are required to give you notice, which varies based on state law and the reason.
5. Deny you coverage because another insurance company turned you down
Insurers can look at a variety of factors when evaluating your application, but they can’t deny coverage based on the fact that you have been denied by another insurer. However, they can deny you coverage for the same reasons the other insurer gave, such as your driving record.
6. Turn you down because you have previously been insured by an assigned-risk plan
Insurance companies can't deny you coverage simply because you were previously insured through an assigned-risk insurance plan. Assigned-risk plans are the last-resort insurance for drivers unable to find coverage on the open market, usually because they are high-risk drivers. However, because every state requires some kind of liability coverage for all drivers, insurers in those states agree to share the burden of these highest-risk clients.
If you have improved your record and now meet the requirements to be insured on the open market, an insurance company can't deny you coverage just because of your past insurance through such a plan.
7. Deny you coverage solely based on your credit history
While insurers in most states consider a credit-based insurance score when setting your rates, they cannot deny coverage based solely on your bad credit.
8. Require full payment upfront
Most insurers offer a small discount if you pay the policy in full, but they cannot require it. You have the right to pay for your insurance in installments. Insurers are allowed to charge a fee for each installment. (One exception is if you have SR-22 insurance that requires an SR-22 form, which is a form that your car insurance company must file with the state to show that you have obtained -- and will maintain -- certain auto insurance coverages.)
9. Discriminate based on membership in any protected class
Insurance companies can't refuse you coverage based on any federally protected class or any class protected by state law. That includes race, religion, national origin and sexual orientation, among others.
10. Make changes to your coverage without your knowledge or permission
Any insurance company can’t change your liability limits or add or remove any coverage from your policy without your agreement. Once the policy is issued, it’s a legally binding contract, and the company can’t make changes (but you can).
FAQ
Can an insurance company change your policy without notice?
No, an insurance company cannot change your policy without giving you notice. They must inform you before making any changes to your policy.
Can an insurance company add a driver without your permission?
No, an insurance company cannot add a driver to your policy without your permission. They need your consent before making any changes to your policy, including adding a driver.
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