Auto insurance is something you can’t go without. You need it to drive because every state has its own requirements for minimum coverage. You’ll need to show proof of auto insurance to register your car, and again if you get pulled over or are involved in an accident.
Clearly, car insurance coverage is necessary, so why can auto insurance companies deny coverage? Below are three scenarios when this can occur along with some tips on what to do next.
Scenario #1: The Insurer Denies Your Application for Insurance
· What can happen: When you apply for auto insurance coverage, your application may be denied. Denial of coverage at the application stage is often based on your driving record. If you have a high number of tickets or crashes, or if you have a DUI or other serious driving conviction, your application for insurance may be rejected.
Other factors can also impact whether your application is denied. For example, if you live outside the area where the insurer operates, the insurer will deny your application. If you’ve let your insurance lapse in the past, these coverage gaps may be a problem. Depending on where you live, your credit score can also make a difference.
· What to do: Apply for coverage with another insurer. Another insurance company may be willing to provide coverage, even if you were denied a policy somewhere else. If a poor driving record is the reason for your denial, taking a driving course may also help show that you are becoming a safer, more responsible driver.
Scenario #2: The Insurer Cancels Your Coverage
· What can happen: Even if your initial application is approved and you purchase a car insurance policy, your coverage may be cancelled. This can happen for several reasons. For example, if the insurer discovers that you lied or misrepresented the truth on the application, you can be denied coverage. One common example of this is garaging fraud. Where you live can have a major impact on the monthly premium you pay. For this reason, some people lie about their home address. This is known as garaging fraud, and although some insureds may see it as a white lie, it’s considered a major problem in the industry – and it could cost you your coverage.
Driving infractions can also result in your coverage being cancelled. This could happen if you accumulate multiple smaller infractions, such as tickets and minor crashes. It could also happen after a single more serious infraction, such as a DUI.
Failure to pay the premium is another common problem. To maintain coverage, you need to keep your premium payments up to date. If you use automated payments, make sure the financial information is still correct. If the debit card you use expires, for example, you will need to enter a new one.
· What to do: This scenario is easy to avoid. Just be honest on your application and always pay your premiums on time. If you have coverage, be careful to keep it in force. Don’t give your insurer a good reason to cancel you.
Scenario #3: The Insurer Denies Your Auto Insurance Claim
· What can happen: Having valid car insurance does not necessarily mean that every claim will be covered. Individual claims can be denied for a range of reasons. Some claims are denied because they are not covered under the policy. For example, the driver may be excluded on the policy, or the type of claim may not be covered. Drivers who use their personal vehicle for commercial purposes – like driving for Uber – may also have problems if they only have personal coverage.
Claims will also be denied if it is discovered that fraud is involved. Claims investigators are trained to look for red flags that may indicate a claim was staged or falsely reported. Fraudulent claims will not be paid, and the fraudsters may also face criminal charges.
· What to do: Always read your policy and understand your coverage before you’re involved in an accident. If you’re confused, ask your insurance agent for clarification. Buy the best coverage you can afford to maximize your protection. If you need to file a claim, be honest and forthcoming with the facts.
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