When you apply for car insurance then they will examine your application and decide to cover you or not as per your risk. They evaluate your application as per many factors and as per their underwriting they may also reject the application. The insurance company has no obligation to provide you coverage as per your requirements. Many factors may affect your insurability and when they decide to cover you this would affect how they calculate premiums. Sometimes your insurance company may refuse coverage at renewal. Or, they may increase your premiums so high that you have no option left other than to shop around and seek coverage elsewhere.
As much as there is competition in the insurance industry, at the same time insurers may not want to cover a risk that could prove very costly later. However, the entire insurance industry may not deny you and then you may have an option to get insurance from the Facility Association. The auto insurance industry established the Facility Association to provide coverage to those denied by the regular market.
Can Car Insurance Companies Deny Coverage
If the car insurance company’s underwriters determine that there is a high risk in offering coverage to an applicant then they may deny it. It is necessary that every insurance company has to file their entire underwriting rules with the FSCO. After the FSCO reviews and approves these rules then that insurance company may not deny coverage as per a different rule. The insurance company has to provide you a written valid reason if they deny you coverage or refuse to renew your policy. They must also inform you of the applicable underwriting rule that they used to deny you insurance.
The insurance company may not file certain underwriting conditions to deny coverage. These include credit history, mental or physical disability, the location of residence or vehicle, and if you are a new driver in Canada.
Car Insurance Declined Reasons
An insurance company may deny coverage due to the following reasons.
- Too many violations on the driving record
- Gaps in insurance coverage
- False information on the insurance application or misrepresentation of facts
- Luxury or high-performance car
- Your car has modifications that may render it unsafe
- Criminal charges for DWI or DUI
- Frequent and huge amounts of claims
- History of payment defaults
- Insurance fraud
- Non-disclosure of material information
- Breach of the previous insurance contract
- Claim fraud
What To Do If An Auto Insurance Company Denies Coverage
Yes, it is true that the whole industry may not reject your application for basic car insurance. When many insurers deny you coverage then you may approach an insurance company that specializes in high-risk coverage. These insurance companies may provide you coverage under their terms but at a higher premium. You may not have much room left to bargain for rates when you are a high-risk category. At the same time, car insurance is mandatory and you may not drive without it. You may try to speak to many insurers who provide high-risk coverage and compare their rates.
If you can afford those rates then you may choose one of them as your insurer. However, it is best not to lie to them to reduce the rates as they may find out later and then cancel your coverage. These non-standard insurance companies do their research before giving you any coverage. This means you are back to square one and the only option left would be Facility Association. It is a pool that all car insurance companies belong to and provide coverage to those who could not find insurance in the voluntary market.
What Insurance Companies Look For When Qualifying You For Auto Insurance
When you apply for car insurance then they look at the following criteria to evaluate and qualify you. For the insurance companies, your past insurance history and other vital factors may determine how likely it is that you may claim in the near future.
Car insurance companies consider the following factors while qualifying your application:
Your postal code determines the risk in the area you live and keep your car.
As per claims statistics and other data, younger drivers are considered high-risk and hence they end up paying higher premiums. If you are too young or too old, either way, it could affect your insurance.
Yes, there are several types of crash data that show that male drivers cause more collisions than female motorists.
Whether you are single or married, it is a factor that could affect your car insurance. Apparently married drivers are less risky than single drivers.
The number of years that you have been driving is a factor for insurance. Mature drivers with several years of safe driving habits may get a good rate than a novice driver.
Your driving record will be a reflection of your driving habits to an extent. It will show your convictions and violations that the insurer would check.
The frequency and severity of your claims in the past is an important factor for your insurance application. Frequent claims in a short duration of time may not impress your insurer and could indicate a high risk.
Poor credit history may show that you have defaulted on payments or could not fulfill your payment obligations on time.
Previous insurance history
When your previous insurer refuses to renew your policy due to any reason that could affect your current application.
If you drive an economy car or a high-performance vehicle, its profile is a very critical factor.
The purpose to use your vehicle may affect your application greatly. Whether you drive to work, for errands or commute for pleasure may change the calculations. In case you use your car for business purposes then you may need a commercial policy and not personal car insurance.
Another important factor is the average distance that you drive in a year. Your insurance company may also look at what time of the day and traffic conditions you drive the most.