Help! Can a car insurance company really drop you? | finder.com.au

Can a car insurance company drop you?

Are they allowed to do that?

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There are two ways a car insurance provider can drop a customer.

  • Refusing to renew a policy. This can be done at the insurer’s sole discretion, in line with any guarantees or policy terms it has written up about renewals. If it has promised “guaranteed renewal” then there might be some stricter rules around it, but this will generally not be the case.
  • Cancelling the policy of an existing customer. An insurer can’t just cancel a policy whenever it wants. There are only a few situations where an insurer is allowed to do that.

When is an insurer allowed to drop you?

Insurers can generally refuse a renewal as desired, but can’t simply drop customers that easily. An insurance policy is a contract, and the insurance company can’t bail out of it unless the contract has been violated.

There are two main ways this might happen:

  • Unpaid premiums: If your premiums go unpaid for a while, an insurer has the right to eventually cancel your policy. The exact lengths of time can be found in your policy.
  • Dishonesty or violation of terms: If you are found to have lied on your application for the purpose of obtaining a lower premiums, made a false claim, committed insurance fraud, entered into the policy dishonestly (such as with a fake identity) or otherwise gone thoroughly against the terms and spirit of the contract, the insurer may cancel your policy.

Generally, as long as the premiums are all paid up, a customer has to step pretty far out of line to be dropped by a car insurance provider.

How much notice do insurers have to give you?

Car insurers must give you notice if your renewal is being declined or your policy cancelled.

This must be in the form of a written notification, provided at least three business days ahead of cancellation of a declined renewal.

Do insurers have to give a valid reason for cancelling a policy or denying renewal?

Insurers are not generally required to provide this information unprompted, but often will.

If you ask for a reason, insurers are usually required to provide it. Similarly, insurers are typically obligated to provide details of their dispute resolution process if requested.

Need cover, stat? Quickly compare your options below

Comparing car insurance will not only make sure that you get the right product but will also help you get the best price.

Name Product Roadside Assistance Accidental Damage Storm Choice of Repairer Agreed or Market Value
Budget Direct Comprehensive
Optional
Optional
Agreed or Market
Finder's summary: Awarded the 2019 Finder Award for the Best Value Car Insurance, this policy offers solid coverage at a low cost plus you will get 15% discount on first year's premium when you take out a policy online. Budget Direct’s claims service has received a 4.2/5 based on nearly 5,000 customer reviews.

Who it might be good for: People who want a comprehensive policy without breaking the bank.
QBE Comprehensive
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Agreed or Market
Finder's summary: QBE is a sustainable insurance company and also Finder's Green Insurer of the Year 2020 Award winner. This policy offers the highest level of protection available from QBE including three-year new car replacement. You can also save $75 when you purchase a new comprehensive policy online. T&Cs apply.

Who it might be good for: Those that are looking for a more environmentally friendly insurance choice.
Bingle Comprehensive
Market
Finder's summary:Bingle consistently comes up as one of the cheaper insurers out there. It only covers the basics, so you don't get to choose your own repairer, you're not covered for personal items in the car and unless you add it as an option, you won't get a hire car if your car is stolen. But this keeps its premiums low.

Who it might be good for: Someone who wants a low-cost option that covers them for the basics.
Coles Comprehensive
Optional
Agreed or Market
Finder's summary: Coles have two-tiers of comprehensive car insurance to choose from. You'll earn double flybuys points at Coles supermarkets and you can get $10 off your Coles grocery bill every time you redeem 2,000 Flybuys points. If you're over 30, you can get roadside assistance free for a year.

Who it might be good for: Coles customers and Flybuys collectors.
Poncho Comprehensive
Agreed
Finder's summary: Poncho works like a monthly subscription – you pay monthly and can cancel and leave at any time. You can also list multiple cars and drivers under one policy, making it ideal for families and groups living together under one household.

Who it might be good for: People who want their car insurance month to month.
Qantas Comprehensive
Optional
Optional
Agreed or Market
Finder's summary: You'll be able to choose how comprehensive you want your cover to be with optional extras like choice of repairer and the option of agreed or market value. Plus earn Qantas Points for joining and paying your premium. Sign up by 2 May 2021, you can earn up to 30,000 Qantas Points (points awarded will be based on your premium). T&Cs and eligibility apply.
Virgin Comprehensive
Optional
Optional
Agreed or Market
Finder's summary: Finalists for the 2019 Finder Awards for Best Value Car Insurance, Virgin Comprehensive provides a good level of cover for a decent price. Get 15% off on your first year’s premium when you purchase a new eligible comprehensive car insurance online. T&Cs Apply.
Stella Comprehensive
Optional
Agreed or Market
Finder's summary: Stella’s a female-focused insurer. It'll cover you if your car is damaged as a result of domestic violence. It offers higher cover for baby gear than most, with up to $2,000 cover for prams, strollers and child seats. Get $50 cash back when you purchase online between 1 April – 30 June 2021 using the code STELLA50. T&C apply.

Who it might be good for: Someone who wants a female-centred car insurance policy (it will cover men too).
Youi Comprehensive
Optional
Agreed or Market
Finder's summary: Youi Comprehensive Car Insurance is one of the few providers to include roadside assistance in its policy. You'll also get access to YouiRewards which gives you discounts on furniture, parking and more. Youi also has a live chat feature on its site to talk through any questions.

Who it might be good for: People over 25 who want comprehensive cover with a focus on customer service
Real Comprehensive
Optional
Agreed or Market
Finder's summary: Real Comprehensive Car Insurance provides similar coverage to other insurers for the important stuff like looking after your car if it's stolen or you crash. They're also one of the few insurers who offer a Pay As You Drive policy, so you might be able to save big if you don't drive much.

Who it might be good for: Those that don't drive much can take advantage of their Pay As You Drive policy.
Australia Post Comprehensive
Optional
Agreed or Market
Finder's summary: Australia Post car insurance offers comprehensive cover for things like theft, fire, new for old replacement and emergency accommodation and transport. Cover also extends to anyone who uses your car, not just you.

Who it might be good for: If multiple people use the one car and you don’t want to worry about listing all drivers.
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Why might a renewal be declined?

There are many reasons a renewal might be declined. Typically, it’s some variation on you being a statistically riskier driver than you were when you took out the policy.

Typically these will manifest as higher premiums first, but eventually an insurer might simply consider the risk unreasonable.

A suddenly declined renewal could be any or any combination of risk factors an insurer considers, including:

  • Entering a new age bracket
  • Getting speeding tickets
  • DUI
  • Having too many at-fault accidents
  • Making too many claims
  • Missing too many premium payments
  • Adding modifications that affect car performance, or significantly affect its value

How to avoid being dropped by an insurer

The best way to avoid having a policy cancelled is to not commit insurance fraud, to be honest on your applications and claims and to keep up with premium payments.

Making sure your renewal is accepted can be more difficult. Where possible, try to:

  • Only making claims when you need to
  • Drive carefully
  • Follow the road rules
  • Drive a sensible car
  • Keep up with premium payments

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