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Insurance Policy Non-Renewal vs Cancellation - What's the Difference?

For insurance companies, there are two ways to stop providing coverage on your insurance policy. The first method is to cancel the policy, and the second is to decide not to renew it. The difference between these methods is as big as the difference between night and day, and how much trouble you will have getting replacement insurance will depend on which method was used to end your current coverage.

All things considered, it is much easier to overcome a non-renewal notice than a cancellation. If your policy is canceled, you may have difficulty finding another company who will write you a policy. If your policy is non-renewed, there are no negative connotations to overcome, so all you have to do is shop around for new coverage and compare insurance quotes. If the new insurance company asks why you are changing insurers, you can either explain that your policy is not being renewed, or fudge and tell them that you are no longer happy with the company you have been doing business with.

Non-renewal simply means that the insurance company has chosen not to renew your policy. You will have to shop for a new policy before the old one is terminated, but you may not have to pay higher rates. As long as you have new insurance in place before the old policy comes to an end, including notifying the DMV of your new insurance carrier (for car insurance), you may not suffer any other consequences of the insurance company's decision. However, notifying the DMV is going to be crucial. If your current insurer cancels your policy, they will notify the DMV of the policy termination as soon as the termination becomes effective, and failure to secure other coverage before that time could result in your vehicle registration or driver license being suspended until you have provided proof of insurance to the DMV.

A cancellation works differently. Your policy can only be canceled if you miss payments, or get so many tickets that your license is suspended or revoked. Having a cancellation means that other insurance companies will take a closer look at your credit and driving histories and you can expect to pay higher premiums. Having a policy canceled is extremely bad, from the insurance point of view, because it indicates that at least one insurance company no longer thinks you are worth the risk to write insurance for.