The Reasons for Auto Insurance Premium Changes in the Middle of a Contract

Can an insurance company change your policy without notice? What are some reasons for auto insurance premium changes mid-contract?

The contract binds your insurance company, and, by law, they can only make changes for certain reasons. As the buyer, you have more leeway to make adjustments to the contract.

However, you need to read your contract thoroughly to make sure you understand any clauses the insurer may have included that allow changes under certain situations.

If you signed the contract, then you also agreed to any clauses that give the insurance company more rights to change the policy in the middle of the contract.

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You Can Change Your Auto Insurance At Any Time

Some changes to your rates are optional; you choose to make them. Again, such changes could increase your premium or they can cause your premium to drop.

Adding coverage, such as increasing your mandatory liability amount from your state’s minimums to an adequate amount of coverage will cause an increase in your premium.

You are buying more coverage, but the increase should generally not be too high.

Similarly, if you reduce your coverage, such as dropping optional coverage like collision and comprehensive, you will lower your premiums.

SmartMoney maintains that collision and comprehensive coverage make up 30 percent to 40 percent of your auto insurance premium. Yet you should only drop these types of coverage if your vehicle is not worth a lot of money.

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Auto Insurance Rate Changes Controlled by the Insurer

According to experts at the Insurance Information Institute, your auto insurance policy can be canceled within 60 days by the auto insurance provider.

Generally, after that time, there are only three reasons that an auto insurer can cancel a policy.

First, they can cancel your policy if you don’t pay your premiums; that’s a no-brainer as it is a breach of the contract.

The insurer agreed to provide coverage and you agreed to pay.

If you don’t pay, then they will cancel your policy. You would be hard pressed to find anyone in the business world who continues to provide a service or a product if you don’t pay for it.

Secondly, an auto insurance company can cancel your policy if your license is revoked or suspended.

Usually, your license has been suspended or revoked because you have broken the law by failing to pay tickets or committing some serious violation, such as a DUI.

Under such conditions, you shouldn’t be driving anyway, and the insurer does not want to take a gamble if you have proven to be a bigger risk than you were prior to the infraction.

Lastly, your auto insurance provider can cancel your policy if you commit fraud.

Generally, this is written into the contract as a clause. If you have misrepresented information about your risk or tried to steal from your insurer by filing a fraudulent claim, then they are no longer obligated to do business with you.

In most cases, if your auto insurance company cancels your policy in the middle of a contract, then they are obligated to refund you a prorated portion of your premium.

Auto Insurance Changes Controlled By You

Can you change auto insurance plans mid year? As the purchaser of an auto insurance policy, you have the ability to change your policy or cancel auto insurance at any time.

Changes can be made that might make your auto insurance premium increase or decrease, according to the National Association of Insurance Commissioners. Some changes you make may be by choice while others are out of necessity.

Some changes you make may be by choice while others are out of necessity.

If you choose to cancel your policy, make sure that you have another auto insurance company that will be providing you with insurance.

Auto insurance companies consider a lapse in insurance coverage an indication of risk, and you will not get a discount for having prior auto insurance coverage.

You can see in the table below how your rates can increase after a lapse in coverage.

A lapse in coverage can more than double your auto insurance rates.

 

Changes You Must Report to Your Auto Insurance Company

Auto insurance providers assess many different factors when creating your quote for coverage. If any of those features change, you must report them to your auto insurance provider in order to have your risk reassessed.

This could cause changes to your premium in the middle of your contract, but the change is not always a negative one!

Another change that you must report is if you get a different vehicle. Your vehicle is not insured until you have an insurance card or printout that states that the particular vehicle is covered.

Your rates might lower if your new vehicle is safer or less expensive to repair.

Even if you add a vehicle to your policy, your rates might not go up that much because you will qualify for a multiple vehicle discount.

Furthermore, you must also add new drivers if they are driving your vehicle with any amount of regularity.

While coverage follows the vehicle in most cases, you could be liable for damages caused by a driver who is not named on your insurance policy.

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Examples of Auto Insurance Fraud

Most people think that auto insurance fraud only refers to hard fraud, such as bogus claims or where groups of people try to cause accidents to file claims against an unwitting victim’s insurance company.

This video from Shouse Law Group discusses some types of auto insurance fraud.

However, the insurance industry and the law take a much harder stance on what is considered fraud, according to the Coalition Against Insurance Fraud.

Even instances of soft fraud can cause your auto insurer to cancel your policy in the middle of a contract.

Examples of such fraud include:

• Padding repair bills on a claim to cover your deductible
• Claiming prior damage was part of a new loss on a new claim
• Claiming a past injury was a result of an auto accident when it was not in order to get medical care
• Insuring your vehicle in someone else’s name
• Claiming you reside somewhere that you actually do not in order to take advantage of lower auto insurance rates
• Claiming you only use your vehicle for personal use when you actually use it for work-related driving
• Low-balling the number of miles you drive in a day or in a year to get lower rates
• Claiming your car is parked in a garage or secured area when it is not

Oftentimes, many people feel that such examples of soft fraud are harmless exaggerations that are an acceptable way to save on auto insurance.

Actually, underwriting and claim fraud cost insurers billions every year, and those losses are passed right back to every driver who pays auto insurance premiums.

Furthermore, auto insurance companies can cancel your coverage if they feel that you lied on your application.

They might just adjust your premium, but more than likely, they will not want to do business with a customer who doesn’t tell the truth.

Similarly, if an insurance provider feels that your fraud is serious enough, they can have you prosecuted under your state’s anti-fraud laws. Convictions for fraud can include fines, jail time or both.

When Auto Insurance Companies Can’t Change Your Rates

Auto insurance companies generally have 60 days, by law, to decide to change your auto insurance policy.

After that, they can only make changes if it can be proven that you committed fraud, your license is suspended or revoked, or you stop making payments.

While there are many instances where an auto insurance provider would probably love to drop you or raise your rates, they are unable to do so until the policy is renewed.

For instance, your insurance provider cannot make changes to your premium in the middle of the contract if you cause an accident.

Even though your risk is higher after an at-fault accident, the insurance company cannot raise your rates.

Once it is time for your policy to be renewed, your auto insurance provider will more than likely present you with a new rate and a higher premium.

This is true for any other instance, such as a DUI, as long as you don’t commit fraud, don’t lose your license, and continue paying.

You could have multiple accidents, and your insurance premiums will not change for the duration of the agreement.

However, once your policy ends, your insurance provider will likely refuse to renew your contract, and you will have to search for new auto insurance.

 

Frequently Asked Questions: Reasons for Auto Insurance Premium Changes Mid-Contract

We’ve added a few more FAQs below.

#1. What factors can impact your monthly auto insurance premium?

Your auto insurance rates are influenced by a number of things. The biggest factors include your driving record, credit history, and commute length.

Your location is also a big factor, and you can pay hundreds more each year by living in a high-crime ZIP code. Your occupation is also factored in.

#2. Why do insurance quotes change daily?

Do auto insurance quotes change daily? Rates set by an insurer must be approved by that state’s insurance commission, but they aren’t guaranteed for long.

Even so, quotes aren’t fully guaranteed as they’re more of an estaimte of the final cost, rather than an exact promise. But if you procrastinate too long on a quote, you can miss out on savings.

#3. Why is my car insurance going up every year?

Why did my car insurance go up for no reason? It can seem like you get a car insurance increase from 2019 to 2020 for no reason, but there are a few reasons offered by insurers.

The cost of vehicle repair is increasing, as is distracted driving-related accidents. When auto insurance companies see an increase in claims they have to pay out, your rates will inevitably rise.

#4. Can health insurance company change your policy without notice?

Once, health insurance companies could cancel your health insurance and invalidate it from the day it started if you made a mistake on your application.

But now, Healthcare.gov notes that it’s illegal for health insurance companies to cancel your coverage for no reason. If there is a good reason, they must give at least a 30 day notice.

If you’re worried about your auto insurance rates, the best way to save is to shop around. Enter your ZIP code below to get free quotes from multiple insurers.