Sometimes life can get in the way of maintaining your car insurance. Before you cancel your auto insurance policy, or it is canceled by your insurance company for non-payment, make sure you understand the risks. Here’s our list of the top five things you should think about before your car insurance is cancelled:
1. Driving without it is a no-no. Driving without car insurance, or proof that you’ve met your state’s financial responsibility requirements, is illegal – and you could end up paying a hefty price if caught.
2. A lapse in coverage could impact your car insurance rate in the future. A lapse in car insurance coverage could lead to higher rates the next time you apply for a policy.
3. Your lienholder (or lessor), if you have one, could repossess your car. Lienholders/lessors want to make sure that their investment is protected in case the vehicle is damaged or completely totaled. If you aren’t able to maintain the amount of coverage required by your lienholder or lessor, they could repossess your car or purchase the coverage for their benefit (also called “force placed coverage” and charge you for it —at a pretty high price.
4. Getting into a car accident isn’t cheap. If you’re deemed at-fault for the accident, you’ll be responsible for paying for the other driver’s medical expenses and vehicle damages. Then there’s the cost of your medical expenses and vehicle repairs.
5. You may be charged for cancelling before the end of your term. In certain states, your carrier may charge you a cancellation penalty if you elect to cancel your policy mid-term. This penalty, also referred to as short-rating, is used to cover administrative expenses and other costs incurred by the carrier from the early termination of the insurance policy. It is deducted from your unearned/return premium, if any. The typical short rate for returned premium is 90% pro rata. In addition, if your agent or carrier charges fees that are fully earned at signing your application, those will be deducted from any down payment you paid. So, you could end up paying more per day of coverage than if you had kept your policy for the entire term.
If you’re looking to cancel your insurance because you’re selling your car or moving to a different state, give us a call at 1-877-GO-DIRECT so we can help make sure you don’t experience a lapse in coverage, even if it’s only a few days. And if we don’t currently offer service in your new state, we can try to connect you with another insurance company that fits your needs.
The cost of your car insurance doesn’t have to be a burden on your wallet. Take advantage of services that can help you make your insurance more affordable, and give us a call at 1-877-GO-DIRECT or stop by a Direct Auto store to talk with an agent. We may be able to help avoid a cancellation.