Here’s how cancelling your auto insurance will affect your future car insurance rates.
If you have to cancel your auto insurance policy before your term is over, you might be concerned about how the cancellation will affect your ability to secure affordable car coverage in the future. Here’s how a cancellation will affect your future auto insurance rates.
- Voluntary Cancellation Vs. Forced Cancellation
It’s important to understand the difference between voluntarily cancelling your policy and having your policy cancelled by your insurance provider. When you choose to cancel your policy, it’s probably for a good reason. For instance, many drivers cancel their policies when they are selling their cars or when they are moving out of the state. If you are cancelling for a legitimate reason, your auto insurer will not hold this cancellation against you. This means that the cancellation will not have a negative impact when you try to secure auto insurance down the line.
When your insurer forcibly cancels your auto insurance policy, this is when cancellation has negative effects. Insurers will only cancel a policy when the policyholder has proven themselves too high-risk to insure. For instance, cancellations can occur due to missed payments, too many claims filed, insurance fraud, or failure to meet the terms of a policy. If your insurer cancels your auto policy, you will be flagged as a high-risk car owner. This will make it difficult to secure coverage at an affordable price in the future.
- Beware of Coverage Gaps
While voluntarily cancelling your auto policy will not automatically have negative effects, you can run into trouble if you cancel your policy and then fail to secure new auto coverage. When you have a gap in your auto policy, future insurers are more likely to view you as risky to insure. As always, the increased risk will translate into increased cost for you. To prevent this from happening to you, make sure you quickly secure a new auto policy after cancelling your old one.
This is how cancelling your auto policy now will affect your future ability to secure affordable auto insurance. Do you have additional questions regarding your auto insurance? If so, contact the experts at Phocus Insurance in Phoenix, Arizona. Our dedicated team is ready to assist you with all your coverage needs today.
