Losing Your Insurance   

Companies may cancel or nonrenew a policy for a variety of reasons. Cancellation means the company terminates your policy before its expiration date. Nonrenewal means the company refuses to renew your policy when it expires.

A company must explain in writing its reasons for declining, canceling, or not renewing your policy. This explanation must include the incident or risk factor that violated the company’s underwriting guidelines and the insurance company’s sources of information.

Canceling a Policy

An insurance company may not cancel an auto policy that has been in effect for more than 60 days unless

• you fail to pay your premium
• you file a fraudulent claim
• your driver’s license or car registration are suspended or revoked (this also applies to other drivers who live with you or use your car).

During the first 60 days you have a policy, a company may cancel it for any lawful reason, including a ticket or an accident. If the company cancels your policy because of an accident, it still must pay for covered damages resulting from the accident. The company must send you a written notice at least 10 days before canceling your policy.

If either you or the company cancels your policy, the company must refund you any unearned premium. Unearned premium is the amount you paid in advance that did not actually buy coverage. For example, if you paid a six-month premium of $600 and you cancel your policy after one month, the company owes you $500 in unearned premium, minus any applicable agent or policy fees.

Not Renewing a Policy

A company cannot refuse to renew your policy unless it has been in effect for at least 12 months. This means a company must renew a six-month policy to give you a full 12 months of coverage. The company must give you 30 days’ notice before refusing to renew your policy.

In Texas, a company cannot refuse to renew your policy because of

• weather-related claims, including damage from hail, floods, tornadoes, high winds, and hurricanes
• damage from hitting animals or birds
• damage from gravel and other flying and falling objects (the company can raise your deductible if you have three of these claims in 36 months)
• towing and labor claims (the company can refuse to renew your towing and labor coverage if you have four of these claims in 36 months)
• other claims or accidents that cannot reasonably be blamed on you, unless you have more than one of these claims in 12 months.

Sometimes an insurance company will move you to another company in its company group. If it moves you, it must give you 30 days’ notice that it will not renew your original policy. ITDI can require the company to renew your policy for another year if it doesn’t give you notice.

If you get a nonrenewal or cancellation notice, start shopping for new insurance immediately. Make sure you keep your liability coverage uninterrupted to satisfy Texas’ financial responsibility laws.