Driving a junker?

Most states allow insurance companies to carefully consider the condition of your vehicle and how it's being used when deciding whether to renew your policy. For instance, your insurer generally may cancel your policy after 60 days if it learns that your vehicle failed a state inspection, you've altered it inappropriately or you're using it for business purposes (to transport employees, flammables or explosives, for example).

Many states also spell out when auto insurance companies cannot deny you coverage. In Texas, they can't refuse to renew your policy because of accidents that weren't your fault (unless you have two or more in one year) or for damage caused by weather or wild animals.

Some states also prevent auto insurance companies from refusing coverage based solely on your age or your credit record.

In New York, auto insurance companies can't refuse to renew a policy just because you're over 60. And an insurer can't drop you just because it has severed ties with your agent or broker.

In Illinois, auto insurance companies can't cancel your policy solely for claims resulting from hate crimes committed against you in the past five years. They also can't refuse coverage because of age, gender, race, color, creed, ancestry, occupation, marital status, employer or physical disability.

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If your insurer decides to cancel your policy for nonpayment, it usually must mail a notice at least 10 days before the cancellation date. If auto insurance companies are canceling your policy for other reasons, they generally have to give you more notice, anywhere from 20 to 45 days.

In many states, you have a right to a detailed explanation of what factors prompted the company to drop you.

What to do if your policy isn't renewed

If your auto insurance company notifies you that it is dropping your coverage, you have several options:

  • Contact your insurance agent and find out if and how your policy can be reinstated.
  • Contact competing companies to get car insurance rate quotes.
  • If you have trouble finding a company that will insure you, contact an insurance company that specializes in the "nonstandard auto market" for high-risk drivers.
  • If no one else wants to insure you after your policy cancellation, investigate insurance through your state's high-risk car insurance pool. Expect rates to be high.

In some states, such as Illinois, you can appeal the cancellation or nonrenewal to the state insurance department.

Whatever you do, act quickly. Auto insurance companies look at the length of any policy lapse and may charge more if the gap is lengthy. Not to mention that driving without insurance is illegal in most states.

This article was reported by Jim Sloan for Insure.com.