There are 4 important circumstances, where the auto insurance policy is cancelled by the insurance company. Policy holders also cancel their auto insurance policies due to changes in their circumstances. They are
Car Insurance Cancellation
1. When a policy is issued by an auto insurance company it cannot cancel the policy as per the state laws. However, if the policy holder fails to pay the premium of the policy on time then the auto insurance company has the right to cancel the policy. In general, auto insurance companies give enough time to renew the policy even after the due date. However, if you still don’t pay the premium they will cancel your policy. In addition, you will be charged for the stand in period. The stand in period is the time frame between last day of your policy and grace time that you get from the auto insurance.
2. While taking any policies, if the policy holder had obtained the policy by way of misrepresentation or any fraudulent activities then the auto insurance carrier can cancel the policy. For example change in name, incorrect date of birth, false address and any other mal-practices will result in cancellation of the policy.
4. If your driver’s license is revoked or suspended, this can cause cancellation of your auto insurance policy – even if you are not the guilty party. It can happen even if your family member who drives your vehicle.
In general the policyholder may choose to cancel an insurance policy at any time by giving notice to the insurance company. In some cases the policy holder may be required to return the original policy or sign a policy release and of course he/she will be responsible for any premium accrued through the date of cancellation.
Sometimes there will be financial penalties for early cancellation by the policyholder. For example, if you have a one year policy and you request cancellation after six months, the short rate penalty would allow the company to retain more than one-half of the annual premiums that is held by the company. Also, many types of auto insurance policies impose surrender charges on the policies held by the policy holder, if they are canceled before they have been in effect a certain number of months or years. A policy must clearly describe any applicable cancellation penalties or surrender charges.