All About Car Insurance Renewals
A car insurance cancellation occurs when your provider drops your coverage before the term of your plan has ended. A nonrenewal occurs when your coverage is dropped at the end of your policy’s term. Your auto policy term is six months to a year, and about a month before your term ends, your provider will send you a notification letting you know the date when your coverage will cease. If your insurance company refuses to renew your policy, you will need to seek insurance from another company before your term ends. If given the option to renew, you’ll need to decide whether you’re going to stay with your current provider or seek a new carrier for a better rate. If you decide to go elsewhere, notify your current provider and get coverage before your term with your previous insurer ends to avoid a lapse in coverage.
Keep reading to find out more about car insurance renewals, how they differ from cancellations and what you can do if your provider decides not to renew your policy.
How Does a Car Insurance Renewal Work?
When the term of your insurance policy is nearing its end, typically between six months to a year, you will be notified by mail or email of a refusal to renew or you’ll be given the option to renew your coverage with your current provider. You can choose to either renew or cancel your coverage.
Renewing is a simple process. All you’ll typically need to do is pay your new premium and your coverage continues, though some insurance companies may ask you to fill out new forms. Your insurance rates could change when you’re up for renewal, even if you have a clean driving record and haven’t filed a claim. There are several external situations that could affect your rates, such as:
- Adding a new vehicle or driver to your policy - Certain types of vehicles will cause you to have a higher premium, such as expensive sports cars. Their design and value make them a higher risk, meaning your insurance company will most likely raise your prices. Your rates will also go up if you add a teenager to your policy. Drivers between the ages of 16 and 19 are almost three times as likely to get into a car accident, according to the CDC. They are therefore a greater risk for insurance companies, so even living with a teen driver means your rates will go up unless you exclude them on your policy.
- Claims in your area - The claims of other drivers in your area could cause your insurance rates to go up. Your rates are calculated based on where you live because providers look at auto accidents, theft and weather-related claims.
- Moving - Moving can cause your premiums to rise. As stated above, your rates will be dictated in part by where you live. If you move to an area where the insurance premiums are high, your premium will rise accordingly.
- Your insurance score changed - In some states, your insurance score is used as a factor when calculating your claim. Insurance companies see a correlation between financial instability and filing insurance claims. So, if your credit score goes down, your rates can change. They can also change if your score goes up, causing you to potentially save on the cost of car insurance.
- Your age - Your age will affect your rates. Being a teenager causes rates to go up and being over the age of 70 usually causes rates to go up as well. The CDC states that almost 540 seniors are injured in car crashes every day and 20 seniors are killed. These numbers cause insurance companies to charge higher prices.
- Loss of discounts - Insurance companies provide their customers with a slew of discounts that can amount to substantial savings. They include:
- Anti-theft discount
- Automatic payment discount
- Bundling insurance discount
- Defensive driving discount
- Distant student discount
- Good driving discount
- Good student discount
- Low-mileage discount
- Loyalty discount
- Military/Veteran discount
- Multi-Car discount
- New vehicle discount
- Organizational discount
- Paperless discount
- Pay-in-full discount
- Profession-based discount
- Telematics discount
Are You Required To Renew Your Car Insurance With the Same Company?
There is no requirement to renew with your current provider. In fact, you should be shopping around to see not only who will give you the better deal, but who has the best customer reviews. If that's your current provider, stick with them. If it isn't, go with someone else. There are several insurance companies out there, and J.D. Power released a 2022 study ranking the best auto insurance providers by region. Each company was graded on a 1,000-point scale. Here's what they found:
- California - The top three companies are Wawanesa (879), the Automobile Club of Southern California (844) and CONNECT by American Family (834). This is Wawanesa's third consecutive year of earning the top spot in California.
- Central - Shelter (866), American Family (848) and State Farm (843) are three of the top providers in this region. This is Shelter's second consecutive year of being rated number one.
- Florida - The highest-ranking insurance companies for this region were The Hartford (860), Allstate (849) and the Automobile Club Group (849).
- Mid-Atlantic - Erie Insurance (867), Travelers (860) and State Farm (851) were the top three contenders for the Mid-Atlantic region.
- New England - Two of the highest-rated providers for this region are State Farm (838) and Plymouth Rock Assurance (834).
- New York - New York Central Mutual (834) and State Farm (831) ranked above average in this region.
- North Central - The top three ranked insurance companies for the North Central region are Erie Insurance (87), COUNTRY Financial (868) and State Farm (848). This is Erie's second consecutive year hitting number one.
- Northwest - The Hartford (842) and State Farm (839) are the top two carriers for this region.
- Southeast - Farm Bureau Insurance - Tennessee (876), Auto-Owners Insurance (871) and Erie Insurance (868) all placed in the top three for the Southeast region. This is Farm Bureau Insurance's 11th consecutive year getting the top spot.
- Southwest - The top three providers for the Southwest region are State Farm (848), The Hartford (834) and American Family (833).
- Texas - Texas Farm Bureau (873) and State Farm (851) take the top spots in this region. This is Texas Farm Bureau's 11 consecutive year of being on top.
Note that USAA* placed high above most of the competition in every region but is only available for active military, veterans and their immediate family.
How Do You Renew a Car Insurance Policy?
Your insurance provider will send you a notification either through physical mail or by email stating your policy will be up for renewal about a month before your policy term is up. The renewal process will differ from state to state and company to company. Some providers simply require their customers to pay the new premium. Others may need customers to sign forms in order to continue coverage. Whatever the case, your provider will let you know what is expected of you in order to keep your insurance. If you weren’t able to renew your policy, or you simply forgot to do so, you may still be able to renew your plan depending on the insurance company and how long it’s been since your policy term ended. However, going too long may cause a lapse in coverage, which will raise your rates.
Can You Decline an Offer To Renew Your Car Insurance Plan?
You can decline an offer to renew your car insurance with your current provider. Understand, though, that you will need a new policy already active before your current policy ends. If you don’t, you will have a lapse in coverage, which will most likely cause your rates to go up with any insurer. Also, do not get behind the wheel if your insurance has expired. Most states require auto coverage, and driving without any could result in fines, your license being suspended and/or your vehicle being impounded. Instead, find an alternate mode of transportation if you’re uninsured.
What Happens If Your Coverage Lapses?
A lapse in coverage can cause several things to happen, including:
- Your driver’s license getting suspended
- Your vehicle being repossessed by your leasing company or lender
- Getting points on your driving record
- Higher rates for your car insurance
- Having to file an SR-22
- Having to pay out-of-pocket in the event of an accident
There is usually a grace period for you to make a late payment before a lapse occurs. Or, you can find a new insurance policy if there is no option to renew. Even a short lapse will make any car insurance policy more expensive. If your coverage does lapse, you can either try to find the most affordable policy by shopping around for a different carrier. You can also opt for temporary car insurance while you find a long-term policy.
Can Insurance Companies Decide Not To Renew Your Policy?
Insurance companies do not have to renew your policy if they find you to be high risk. In other words, if they feel you’re likely to file a claim, they can choose to drop you when your policy term has ended. A nonrenewal of your policy can occur for several reasons, such as:
- You’ve had several accidents in a short period of time - Whether you’re at fault or not, too many accidents can cause an insurance company to not want to continue coverage.
- You’ve filed too many claims - The more claims you file, the more of a risk you’re considered to be.
- Your credit score may have dropped too low - Insurance companies see a link between those with poor credit and those who file insurance claims. If your score drops too low, your provider may view you as too high of a risk and refuse to renew your coverage. A low credit score is anything under 580. To avoid a drop in your score, pay off your debts when you can, don’t be late with your bills and don’t use more than 30% of your total available credit.
How Car Insurance Nonrenewal Works
If your provider decides not to renew your coverage, they will inform you as to why they came to this decision. You can also call your provider if you want more information. You can even argue your case if you don’t think your provider came to the correct decision. If that fails, you will need to seek coverage elsewhere and quickly. Waiting to get covered could cause a lapse in coverage. The notice you get stating your nonrenewal will have a date for when your coverage will stop, so buy a new car insurance policy before that date. You can get same-day coverage through these providers:
If you have been in a number of accidents, you may need to get a non-standard auto insurance policy with an insurer that specializes in high-risk drivers, which means your rates will be higher. High-risk drivers have less-than-stellar driving records, have poor credit scores or are new drivers. Being high-risk means a driver is more likely to file a claim against their policy or miss payments. Higher-risk drivers may be required to complete an SR-22 which is filed on the insured’s behalf by their provider and lets the government know that they’re insured.
Whether you have a stellar insurance profile or you’re a high-risk driver, you can save on auto insurance. Enter your zip code below or call 855.214.2291 to compare multiple companies and receive free auto insurance quotes in minutes.