Auto Insurance Obligations: Understand Your Rights & Options
Auto insurance obligations go both ways; your car insurance company has some and you have some as well. Your auto insurance company is bound by non-discrimination laws and must treat you fairly. Raising rates, basing rates on a protected class, or canceling your policy for illegal reasons is illegal under various laws. Auto insurance companies must also provide notice and justification when they cancel your policy for a good cause.
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UPDATED: Jul 19, 2021
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The auto insurance obligations that arise out of a car insurance policy go both ways. You have an obligation not to lie on your application and to inform your insurance company about certain things.
Your auto insurance company has obligations as well. Auto insurance laws require your company to cover you up to the terms of the policy agreement dictate. Just as state law requires you to carry insurance to meet state minimum car insurance requirements, auto insurance laws by state also function to make sure that your insurance company treats you fairly.
Read on to learn about car insurance obligations and all of your rights and responsibilities as an insured driver. If you need to compare auto insurance rates, you can search using our FREE tool to find the best deals on car insurance right now.
Auto Insurance — Your Rights and Responsibilities
Insurance companies are legally obligated to treat you fairly. And there are many laws in place, on both a state and federal level, to make sure these companies do so. Unfortunately, these laws are needed because companies have, in the past, tried to alter customers’ coverage based on unfair or irrelevant reasons.
The only way your insurance company can treat your policy differently, alter your coverage, or charge you a different rate is if they can back their decisions with sound reasoning based on insurance principles. No insurance provider can legally get away with carrying out discriminatory business practices (meaning that they cannot deny or limit your coverage, charge higher premiums, or refuse to renew your policy) based on any of the following criteria:
- National Origin
- Full or Partial Disability
- Domestic Partnership Status
- Marital Status
If you feel you have been treated unfairly by your automotive insurance provider, you have a right to report them to your state’s department of insurance.
What happens if a company cancels my policy?
If your policy is to be canceled due to nonpayment issues, the insurance company is required to send notice 10 days in advance. Thirty-day notice is necessary for all other reasons for cancellation or non-renewal. In addition, the insurance company must enclose proper documentation and an explanation of why they took that action when they send you the notice of cancellation.
There are many reasons an insurance provider may choose to cancel your policy outside of non-payment. However, most of them are related to having a bad driving history. Ask yourself if you’ve had any DUI’s or speeding incidents in the recent past. Another common factor involves filing too many claims or filing expensive claims in rapid succession. These two things make you a higher risk for the insurance companies to insure. And, unfortunately, insurance companies are legally permitted to discriminate based on perceived risk.
What if my car is totaled?
If you lack gap coverage, and your car is totaled, your insurance company will only pay up to the car’s fair market value. In many cases, unfortunately, this doesn’t always cover the total cost of replacing a totaled vehicle.
Your insurance provider is required by law to explicitly tell you how they came to the conclusion of what the fair market value for your car is in writing. They must be fair in this determination. However, if you believe that your car is worth more than the insurance company is willing to pay you, you can sometimes negotiate with your insurance provider. Just remember to present tangible evidence of this fact. And it won’t hurt to recruit some legal counsel (if you can afford it, that is).
What if I can’t get approved?
If you’re unable to obtain car insurance on your own, you might be eligible for coverage with an assigned risk pool. Your insurance agent should be able to give you additional information, and possibly be able to cover you through the Western Association Automobile Insurance Plans. Their mailing address is P.O. Box 7917, San Francisco, CA 97104.
It’s also important to know what to do in the unlikely event that your insurance company goes under and can no longer pay its claims. Most states have a backup to protect insured policyholders from losses in these cases. The association is created by state law, and is comprised of various insurance companies competing in the state. It covers policyholders and people making claims up to the sum of $300,000. Claims are paid out under the same terms that the policyholder and the insolvent insurance company agreed upon.
Now that you know your rights, it’s time to exercise them in order to get the best deal on car insurance near you. Just enter your ZIP code below and exercise your right to compare quotes before you buy. It couldn’t be easier!