All auto insurance policies come with a premium; the cost-per-insurance period. This premium is payable either in full or it can be paid in installments. If you have ever received an insurance letter containing a cancellation form, chances are you were late with your monthly payment however there are other reasons why an insurer might cancel a policy.
Accruing a large number of traffic offenses, a DUI, a requested change in your coverage or were dishonest in the application are all grounds for termination. Some insurers may elect to charge a cancellation penalty, although that is not always the case. A sample letter from an insurance company regarding a cancellation may start like this:
“Due to an excessive number of traffic violations in the past six months, we regret to inform you that your insurance policy is cancelled effective immediately. If you feel this decision was reached in error, please contact…”
This only stands to indicate one of the reasons why an insurer might cancel a policy. If an insurance company ever feels you pose too much risk, your policy may be cancelled. They are in the business of assessing risk and they are betting with each customer that they won’t have to pay out any settlements. Whenever that bet becomes a bad one, cancellation may be on the horizon.