It also does not apply if the insured vehicle was declared a total loss, or if the insured person is entering the U.S. As noted earlier, this extra charge does not apply if you cancel an Auto Plan policy in order to transfer your coverage to an insurer in the voluntary market. Alternatively, rather than using the short-rate basis, some insurers now charge a flat cancellation fee in addition to the pro-rata amount.
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This practice permits insurance companies to cover the cost of their administrative expenses on policies that do not run their full term. However, this difference may be greater if the policy is canceled towards the earlier portion of the policy period. This additional cost, on average, is approximately 10% of the unexpired portion of the premium. This means that the insurer will retain a greater portion of the premium than on a “pro-rata” basis which is equivalent to what proportionally represents the expired part of the premium or “earned premium”. If you cancel an auto policy before its expiration date, some insurers will calculate the amount of your premium to be refunded on a “short-rate” basis. Keep in mind that if you are convicted of driving while intoxicated or impaired through the use of alcohol or drugs (DWI or DWAI), in addition to a minimum $300 fine, the Department of Motor Vehicles will also revoke or suspend your driver’s license.
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If your driver’s license is suspended or revoked, or if you fail to pay your premium when due, your insurer is permitted to cancel your policy mid-term or refuse to renew it. A senior citizen can elect to have the auto insurer send a copy of any termination notice to a designated party acting on behalf of the senior citizen. In addition, the law requires any cancellation notice for nonpayment of premium to clearly state the amount due. Mid-term cancellations, when permitted, may only be made when a notice is sent at least 20 days prior to its effective date, or 15 days prior if non-payment of premium is the ground for cancellation.Īny cancellation notice must state the reason(s) for such termination. Mid-term cancellation is not permitted after a new policy is in force for 60 days, or anytime during a renewal policy, except for such limited reasons as revocation or suspension of a driver’s license of any person insured under your policy, non-payment of premium, or discovery of fraud or material misrepresentation.
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