Permissible Cancellation Reasons

• Each state's laws stipulate permissible reasons for cancellation of an auto insurance policy before expiration of the policy term. Common reasons include fraud and misrepresentation by the policyholder, relocation to a state where the insurance company does not hold a license and suspension or revocation of a policyholder's driver's license. Involvement in an accident is not commonly a permissible reason for cancellation.
  
  

Exception

• Most states grant insurance companies a certain period, usually 60 to 90 days after initiation, to review the policy and evaluate the driving history of all drivers insured under a policy. During this time, an insurance company may typically cancel a policy for any reason not related to gender, marital status, creed, sexual orientation or race. If you are involved in a motor vehicle accident during this period, the insurer may cancel your policy.
  
  

Nonrenewal

• Nonrenewal is not the same as cancellation. Nonrenewal occurs when an insurance company declines to renew a policy at the end of a term, which is usually six or 12 months. Cancellation rules and restrictions do not apply to nonrenewals. An insurance company can typically elect to nonrenew your policy if you are involved in a motor vehicle accident during the policy term, particularly if you are at fault. Not all states allow insurance companies to decline renewal at the end of each policy term. For example, in Ohio, an insurance company may only nonrenew after four six-month terms or two 12-month terms.
  
  

Notice of Cancellation

• If an insurance company decides to cancel your policy for an accident during the initial evaluation period, it must typically send you notice of its intent to cancel before terminating your coverage. The length of notice varies by state -- most states require insurance companies to provide notice between 10 and 30 days before cancellation. If you believe the cancellation is not valid -- for example, if the insurance company obtained erroneous information about an accident -- you can ask your state's insurance department to review the insurance company's decision.