10 things your auto insurance company can’t do

When it comes to turning you down for coverage or to canceling your policy, insurance companies have to follow state laws. The company has to give you notice and can’t cancel for any reason after a certain number of days.

Written by Mark Vallet

Mark is a freelance journalist and analyst with over 15 years of experience covering the insurance industry.

Reviewed by Leslie Kasperowicz

Leslie Kasperowicz is an insurance expert with four years of direct agency experience and over a decade of creating educational content to help insurance shoppers make confident, informed decisions.

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Receiving a letter that says your auto insurance policy is being canceled can be a shock. Can they really do this? Can my car insurance company drop me like that?

State laws differ, but there is a period of time during which the insurance company can cancel your policy for any reason. This gives the insurer time to investigate the accuracy of your application and determine your level of risk. It’s called the “binding period” and is usually from 30 to 60 days from the day your policy was issued.

The most common reason for a cancellation during the binding period is due to underwriting, says Kristofer Kirchen, president of Advanced Insurance Managers in Tampa, Florida. "Discovering an undisclosed driver, failure to provide requested information and vehicles that do not meet coverage requirements are common.”

Once the binding period has passed, your insurer can cancel only for specific reasons such as nonpayment, fraud or the suspension of your license. These reasons can vary state to state. It’s important to know what to do if you’re denied auto insurance so you can stay insured regardless of your situation.

• During the binding period, usually from 30-60 days, the insurance company can cancel your policy for any reason. After that, there are only a few legal reasons for cancellation.
• Usually, policies are canceled because of something found during the underwriting process that would have stopped the insurer from issuing the policy in the first place had it been known.
• You have the right to know why the policy was canceled, and can request a copy of any reports that resulted in the decision.