It happens all the time; individual drivers lose their auto insurance coverage in huge numbers, for a lot of different reasons, and in a wide range of situations. The epidemic of “loss coverage” is not as bad in auto insurance as it is in major medical insurance (where the government is stepping in), but it still happens quite a bit. As for the causes of loss coverage, here are some of the specified perils that lead to individual drivers for households being dropped by auto insurance companies.
Missed Payments – According to some financial experts, this is the top reason why a driver may get dropped from a policy. Auto insurance companies are quick to drop policyholders in cases of nonpayment. After all, since their product is insurance, reacting to a nonpayment situation is easy. There is no repossession, and none of the tricky paperwork procedures needed for other kinds of collections. The insurers simply drops coverage. This can be a real problem for the policyholder, who has to reapply, often with high fees, and may be denied coverage if anything in his or her driver’s record has changed.
Moving Violations – Getting too many traffic tickets can cause an insurer to pull the rug out from under a policyholder. This is something to watch if you have a lead foot but have not been involved in accidents. Losing auto coverage for traffic citations can be very surprising to some drivers, but it’s something to look out for.
Suspended License or DUI – When a driver has his or her license suspended after a DUI or other incident, this can also lead to a dropped auto insurance policy. Generally, that driver will have to shop around for a new policy that is considered high risk, as the DUI or traffic incident (and a suspended license situation) will raise their individual risk substantially. They may have to pay two or three times what they paid before, and spend time finding a company that will accept them on its insurance role.
Guilt by Association – A driver’s auto policy can be canceled for an infraction by anyone who is on that policy. It doesn’t have to be the primary driver. Some drivers get blindsided by a canceled auto policy when someone in their family gets something negative on their driving record.
False Flagging – Although this is less common, false and erroneous information in certain databases can also result in dropped auto policies for some drivers. Auto insurance companies sometimes use public databases, including those used for what is called C.L.U.E. reports, to find a driver’s risk assessment. Some types of random data can create a “false flag” situation and cause an insurer to drop a policy. These misunderstandings should be cleared up as soon as possible to reconcile a situation and restore the driver’s insurance.
Changing Garage Location – Other issues, like moving out of state, also called policies to be dropped or negated because they no longer apply to the driver’s situation. Usually, a driver can arrange for a neat transition with no lapse of policy just by keeping in touch with the insurance provider.
These are just some of the most common reasons for dropped auto policies. Take care to avoid them and always make sure you’re legally insured for the road ahead.