Car insurance auto renewal, is it legal?

Auto-renewal car insurance policies renew without input from the policyholder. Make sure you know when your auto-renewal car insurance is set to restart to avoid a lapse in coverage.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Sep 15, 2020

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Here's what you need to know...

  • Many drivers prefer auto-renewal for their car insurance to ensure that they never forget to renew their policies and face the consequences of driving without a cover
  • Many insurance firms schedule auto-renewal option on your policy, and you’re able to know when the auto-renewal will take effect
  • If you wish to cancel your auto insurance coverage, you just need to inform your insurer by mail or phone and they’ll stop it whenever you want
  • Auto insurance companies will not make any changes to your policy type or rates unless they make a written notice in advance before the auto-renewal date

Auto-renewal of insurance covers has brought both joy and agony to the lives of auto insurance consumers.

Users who have taken new policies with new insurance firms but failed to notify their previous insurers have ended up with double insurance covers after auto-renewal. They only realize it when money comes out of their debit or credit cards.

Other people assume that their auto insurance covers would auto-renew only to be left uncovered since they failed to activate the auto-renew feature in their policy.

This can be particularly disastrous if you’re caught by the law enforcement officers driving without an insurance cover, or you get involved in an accident.

It is important to check with your insurer when your auto insurance cover is set to auto-renew. This will be helpful to ensure that you’re covered at all times and also to stop the auto-renewal whenever you decide to change the policy provider.

Compare top insurance companies side-by-side to find the best rate for the coverage you need. Just enter your zip code in our comparison tool above to begin.

Understanding the Auto-Renewal Process and Policy Terms

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Car insurance is a requirement for any driver on U.S. roads.

Failure to produce proof of insurance cover will attract hefty penalties or even prison sentence. It would be quite painful to face such charges if you innocently forgot to renew your insurance due to one reason or another. That’s why car insurance auto-renewal is helpful.

Many insurers have adopted the auto-renewal process for car insurance to give you no excuse for forgetting to renew your policy.

Auto-renewal will come automatically on the set date unless you inform your insurer to do otherwise. This is to ensure that drivers never experience the agony of driving without a cover all year round.

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Cons of Auto-Renewal

Auto-renewal has also caused trouble to some motorists who signed up for a policy unaware that it was subject to auto-renewal. This may result in unnecessary expenditures if you get to pay for double insurance covers.

The Financial Ombudsman Service (FOS), an entity that handles consumer complaints concerning a broad range of financial services including insurance, has reported that over five percent of motor insurance complaints they receive come from auto-renewal.

Last year alone, the organization handled over 7,785 motor insurance complaints which translates to more than 21 complaints every day.

Types of Auto-renewal Complaints

FOS indicated that common auto-renewal complaints include:

  • Auto-renewal costs high rates for consumers.
  • There are also some concerns that auto-renewal prices are generally high.
  • Some customers opt for better rates available in the market only to get auto-renewals on their already expensive policies.
  • Car insurance prices have dropped by almost 15 percent over the last one year, a fact that auto-renewals will not integrate into the costs.

Loyalty doesn’t pay

Insurance experts suggest that motorists should not sacrifice their right to access competitive auto insurance rates for loyalty. Many insurance companies will take advantage of the loyalty to auto-renew your cover every time it’s due.

Many motorists are entangled in the system and don’t take a chance to compare rates from various insurers to see if they’re being offered fair deals.

Always watch out when your cover is almost auto-renewed and start comparing quotes. That way your insurance provider will be forced to reduce rates that match what is available in the market. Of course, if they do, it’s better to stay with your trusted insurance partner.

Many insurance companies will send auto-renewal notices about 21-30 days before the cover is due to renew. Use such information to begin your comparison shopping for better rates.

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Enter your ZIP code below to view companies that have cheap car insurance rates.

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The Auto Insurance Term

The typical length of an insurance term is six months or one year. Your insurance will evaluate over that period whether your risk level has changed and whether they’ll renew your policy at the same rates, higher rates, lower rates, or call it quits.

It all depends on the following:

  • your driving records
  • whether you caused any accidents over that duration
  • your credit records
  • the mileage covered
  • claims made

There are only a few specific reasons why auto insurance firm may decide to cancel your cover before the end of the term. One of such reasons is failing to pay your premiums and not informing your insurer in advance.

To avoid cancellation, opt for auto deduction payment methods through debit cards or credit cards.

Switching Auto Insurers

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If you choose to change your insurance provider due to one reason or another, make sure you inform your insurer before the auto-renew date.

Make sure you inform them on the date when your new policy will be taking effect to ensure there is no lapse between the current cover and the new policy cover.

Your new plan should begin on the exact date your old one expires to avoid any chances of driving without a cover for even a day. You never know, that single day may be all that matters.

Canceling a policy before the expiry date may attract some cancellation fees that you’ll want to avoid at all cost. So, make sure you time around the expiry date and avoid the auto renewal as you switch to your new insurance provider.

Summary

Auto renewal for your car insurance is not illegal. It’s a necessary practice that is offered by almost every insurance firm to ensure that you’re covered all year round.

If the renewal was left at your discretion, you could bet you’ll at some point forget your policy expiration date and risk running without the critical cover for some duration of time.

Read your policy document to learn more about your auto-renewal status or call your insurance provider for details.

It’s essential to comparison shop for more competitive car insurance rates around the auto-renewal date to avoid being taken advantage of. All you need is your zip code to get a variety of free quotes before auto-renewing your policy.

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