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.
Has your auto insurance company denied coverage?
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