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 insurer’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 motor vehicle tags 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 colliding with animals or birds
- damage from gravel and other flying and falling objects (the company can raise your deductible if you have three such claims in 36 months)
- towing and labor claims (the company can refuse to renew your towing and labor coverage if you have four such 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 a 12-month period.
Sometimes an insurer will move you to another company in its company group. If a company moves you to another company, it must give you 30 days’ notice that it will not renew your original policy. If the company fails to give you 30 days’ notice, TDI can require the company to renew your policy for another year.
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.
If you still owe money on your car, your lender will usually require you to maintain collision and comprehensive coverages. If you cancel or lose these coverages, your lender will buy single-interest automobile physical damage coverage and add the cost to your loan payment. This coverage is expensive and protects only the lender.
Your Rights against Unfair Discrimination
An insurance company cannot deny, refuse to renew, limit, or charge more for coverage because of your race, color, religion, or national origin.
A company also cannot deny, refuse to renew, limit, or charge more for coverage because of your age, gender, marital status, geographic location, disability, or partial disability unless the refusal, limitation, or higher rate is based on sound underwriting or actuarial principles. This means the company would have to show valid evidence that you present a greater risk for a loss than other people it is willing to insure. A company cannot nonrenew your policy because someone in your family has reached driving age.
In addition, a company cannot discriminate between individuals of the same rate or risk class in its rates, policy terms, benefits, or in any other manner unless the refusal, limitation, or higher rate is based on sound actuarial principles.
You may sue insurance companies for unfair discrimination, including denial of insurance. You must file the suit in a Travis County district court. However, if the court finds the suit groundless, in bad faith, or brought for the purpose of harassment, the court could order you to pay the insurance company’s legal expenses.