There are a number of factors and reasons that an insurance company considers when deciding whether or not to drop a policyholder. These factors include non-payment of premium, too many accidents or tickets/moving violations, dishonesty on insurance application forms, filing fraudulent claims, getting a DUI (driving under the influence), and having your license suspended.
Non-payment of premium – Policyholders who don’t pay their premiums on time risk having a lapse in their coverage, or even being dropped as a policyholder. Insurance premiums are what is called “consideration”, which basically means that you are giving the insurance company something for the coverage that they are providing to you. If you don’t hold up your end of the arrangement, then they shouldn’t be expected to hold up theirs and continue to cover a policyholder who doesn’t pay.
Accidents – Getting into an accident is not seen as a reason to drop a policyholder, but a number of at-fault accidents in a short period of time can be enough of a reason. Drivers who are involved in several at-fault accidents in a short period of time are viewed by the insurance company as a high-risk and having a high potential to be involved in additional accidents. Being viewed as a high-risk driver will definitely increase your premium, but it can also be grounds for being dropped by your insurance company. The decision rests with the insurance company and will most likely depend on the seriousness of the accidents, the amount of the claims, and if there was bodily injury. Additionally, if you already have points on your driving record, you are at even more of a risk of being dropped.
Tickets/Moving violations – Getting a speeding ticket or other moving violation almost always results in a premium increase at renewal time. Your insurance company looks at how many tickets you have and in what span of time they occurred. Based on this information, your insurance company decides how high of a risk you are as a driver and the likelihood that based on the pattern of your driving behavior that you will be involved in an accident with property damage and/or bodily injury.
Misrepresentation on insurance application – Insurance companies don’t appreciate it when potential policyholders are dishonest on insurance application forms. Even if the insurer doesn’t discover dishonesty right away, if they happen to discover such facts later, they might increase the premium or simply cancel the policy at that time. This is why it’s isn’t a good idea to attempt to save money on your premiums by bending the truth on insurance applications.
Filing a fraudulent claim – Filing a fraudulent insurance claim is quite serious and can result in more than simply being dropped as a policyholder. Insurance fraud is illegal and could actually result in jail time if you are convicted. Examples of fraudulent insurance claims include faking injuries and/or knowingly over-estimating (“padding”) the cost of damages associated with a vehicle accident. Fraud is actually so serious and prevalent that insurers often times add an anti-fraud fee to each policy that goes towards the prevention of future fraudulent claims being filed.
Getting a DUI and/or license suspension – Most insurance companies won’t drop a policyholder when they get a DUI or license suspension, but there are a number that will. Insurance companies known as “preferred” insurers will typically allow only a ticket or one at-fault accident within a specified period of time. Getting a DUI or license suspension when you have a preferred insurer will almost guarantee that you will be dropped as a policyholder. Getting a DUI is viewed by your insurance company as evidence of reckless behavior and as a strong indicator that you drive intoxicated frequently and will likely be involved in an accident as a result. As such, you are viewed as an extremely high-risk driver and will either be dropped or have your premium increased significantly.
While it may seem as though insurance companies are just looking for reasons to drop policyholders, it simply isn’t true. Insurance companies have to protect their own interests in terms of properly categorizing and rating policyholders based on the level of risk that they expose the insurance company to with regards to potential claims. If you have shown a pattern of filing claims, a pattern of unsafe driving, or if you have failed to be honest on an application or pay your premiums, then your insurance company is well within its right to drop you as a policyholder.