During the first part of this three part series, California auto insurance rating factors were discussed as well as the main force behind a California auto insurance rate- The California Good Driver discount. The idea of the CA good driver discount and how auto insurance companies determine rates is important- equally important is understanding that auto insurance companies cannot just cancel your policy for any reason. California has very specific regulations when it comes to an insurance company’s ability to cancel a policy and it is very important for consumers to understand these regulations. Sometimes the fear of getting canceled or non-renewed will prevent a policyholder from reporting an accident to an insurance company. That fear the majority of the time is uncalled for- especially if the claim or accident is not the policyholder’s fault.

To start, there is a slight difference between a cancellation and a non-renewal. Although they both result in the termination of the policyholder’s policy, the difference comes when they occur and the amount of notice an insurance company must give the policyholder.

A policy cancellation occurs during the policy term. If an insurance company has legal grounds to destroy a policyholder’s policy during the policy term, they must give the policyholder a minimum of 10 days notice if the policy was recently purchased within 60 days. The insurance company must give a minimum of 20 days notice anytime after the first 60 days of the policy has passed.

A policy non-renewal occurs at the end of the policy term. If an insurance company has legal grounds to non-renew a policy, they must give the policyholder a minimum of 30 days notice that the policy will not be renewed.

For both a cancellation and a non-renewal, the notice must be sent Post Office Receipt Secured or Certified Mail to the last address the policyholder has provided the insurance company. a Phone call or E-mail does not count.

The following are the guidelines first of what an insurance company cannot use as a grounds to slay an auto insurance policy, followed by what they can use legally. Please note that a spouse of the Named Insured is also considered a Named Insured. Named Insured is another name for the policyholder of the policy.

Specific exceptions that cannot be the basis for an underwriting decision;

An insurance company;

Cannot base underwriting decisions on sex, race, color, religion, ancestry, national origin, marital status, or sexual orientation. Coverage and terms offered to registered domestic partners must be equal to that of spouses of a Named Insured.

Cannot cancel or non-renew a policy for an accident in which a Driver on the policy is a Peace Officer, Fireman, Paramedic or California Highway Patrol and the accident occurred while the driver was operating an authorized emergency response vehicle during performance of his duties.

Cannot cancel or non-renew a policy based on the fact the applicant or named insured is in the military or other government agency.

Cannot slay or non-renew a policy as a result of the Named Insured’s inability to content, write, read or comprehend the English language.

Cannot cancel or non-renew a policy because the Named Insured uses a radar or laser detector.

Cannot cancel or non-renew a policy because of a mental or health issue regardless of whether a physician statement has been received indicating the driver should not drive, unless the department of motor vehicles has suspended or revoked the driver’s license or refused to issue a license. Also the policy must be reinstated if the license is issued or the suspension or revocation is lifted prior to the cancellation date of the policy.

Cannot cancel or non-renew a policy solely because of a physical handicap if it has been compensated for. We may required proof that the person qualifies for the issuance or renewal of their driver’s license.

Cannot cancel or non-renew a policy solely because the Named insured is Blind and frequently changes drivers. The blind insured may be excluded. We can still underwrite as usual for the drivers listed on the policy.

Cannot assassinate or non-renew a policy solely for the reason a driver on the policy performs voluntary services consisting of providing Social service transportation for a non-profit charitable organization or governmental agency. This includes providing transportation for senior citizens, or persons with a physical or mental handicap. This instance shall not be considered commercial use.

Cannot cancel or non-renew based on NOT At Fault accidents or for claims that are pending under the policy if the liability and the extent of the damage has not been determined. This means they cannot list any claim- including comprehensive claims as a reason for canceling or non-renewing the Named Insured’s policy, if the accident was not considered at least 51% of the driver operating a vehicle covered under the policy’s fault.

Insurers are prohibited from requiring an insured to carry collision coverage as a condition to having comprehensive coverage. This means an auto insurance company cannot force a policyholder to carry collision coverage if they want to have comprehensive coverage and vice versa.

Insurers must offer Uninsured motorist bodily injury coverage and Uninsured Motorist Property distress coverage (including deductible waiver coverage) on all vehicles on the policy.

Cancellation within or over 60 days and Non-renewal;

Please designate that California does not have an initial underwriting period for new business policies. All underwriting cancellations regardless of whether the policy is a new business policy within 60 days, must topple within the following area guides.

Non Payment of premium

The driver’s license or motor vehicle registration of the named insured or any other driver is suspended or revoked during the policy period. The policy must be reinstated if the suspension or revocation is removed prior to the cancellation date of the policy.

The discovery of fraud by the named insured in pursuing a claim under the policy provided the insurance company does not rescind the policy

The discovery of material misrepresentation of any of the following information concerning a driver on the policy; Safety Record, Annual miles driven, number of years of driving experience, record of prior insurance claims, any other factor determined by the commissioner to have a substantial relationship to the risk of loss. Any insured who negligently misrepresents the information described may avoid cancellation by providing corrected information within 20 days of receiving the notice of cancellation and paying any disagreement in premium.

A Substantial Increase in the Hazard insured against.

The following are the only instances considered a Substantial Increase in the Hazard insured against;

Failing to provide requested underwriting information within 30 days after a reasonable written request. The information requested must be necessary to underwrite or rate the risk. A notice is required on each request in English and Spanish advising of policy cancellation or non-renewal if the information is not received by the insurer.

Permissive use by unlisted drivers which indicates frequent use. 2 lending losses by the same driver is to be considered frequent use. We should offer a named driver exclusion prior to canceling under this provision.
A vehicle on the policy does not comply with Federal or California safety requirements and the condition is not removed prior to the cancellation date.

A vehicle on the policy is altered or modified in order to increase run or acceleration which renders it unsafe in accordance with California Vehicle Code allotment 24002. This basically refers to all racing alterations such as NOS tanks, illegal cam and headers, etc…

A driver’s license is suspended or revoked and the suspension or revocation is not lifted prior to the cancellation date. Suspensions or revocations based on the fact the insurer failed to file an SR22 cannot be considered.
A driver’s license is expired and the driver does not obtain a valid license prior to the cancellation or non-renewal date of the policy.

Commercial consume of a vehicle on the policy. Commercial use is defined as carrying goods or passengers for hire.

A conviction of any alcohol related offense specified in California Vehicle code sections 23152, 23153, 23220, 23221, 23222, 23224, or 23226. This is provided the driver does not otherwise qualify for the California Good Driver Discount. These are all your basic DUIs- including under the influence of drugs

While a auto insurance policy could be Non-Renewed instead of canceled for any of the above moral reasons, a policy may be Non- Renewed and Non-Renewed only, for the following reasons;

Please see piece 1 for a summary of California Department of Motor Vehicle points, including what accidents are considered 1 CA DMV point and which ones are considered 2 CA DMV points.

A driver has 3 or more CA DMV points within 36 months preceding the renewal effective date AND one of the points occurred during the last renewal term. This means that a driver of the policy could have started the policy with 2 CA DMV points, but if he were to be in an at fault accident or have received another traffice conviction that resulted in an additional CA DMV point being applied to his/her characterize, the insurance company would have grounds to non-renewal the policy.

Conviction of a 2 point CA DMV violation preceding 36 months of the renewal effective date. The conviction must have occurred during the last renewal period or must have been unknown prior to the last renewal date. If the conviction was unknown prior to the last renewal date, the last driving record ordered must have been within 75 days of the prior renewal date or the conviction must have occurred within the last 60 days preceding the last renewal date.

A Driver Exclusion form, is a legal binding statement that a policyholder has an option to sign on a driver in order to keep the policy active or to reduce the premium of the policy. In California it basically states no coverage will be provided for a claim that arises when the driver excluded from the policy was the operator of a vehicle covered under the policy.

If a policy is being set to assassinate or non-renewed because of a listed driver on the policy, a driver exclusion must be offered for the offending drivers to the Named Insured if the Named Insured is a California Good Driver based on the definition of a California Satisfactory Driver discussed in part 1, to give the Named Insured the opportunity to prevent the cancellation/ non renewal of the policy. This also applies in situations where the policy is a joint policy between married or registered domestic partners and the policy is being canceled or non-renewed as a result of one of them.

This part will conclude with the coverage and descriptions available on California auto insurance policies. While most insurance companies offer all the coverage listed below, California only requires that insurance companies offer the basic minimum liability insurance coverage. Basic liability insurance coverage is Bodily Injury Liability, Property Damage Liability, Uninsured and Underinsured Bodily Injury, Uninsured Motorist Property Injure, and the Collision deductible waiver if the insurance company offers collision coverage.

Bodily Injury Liability- It pays the medical bills, lost wages or income, pain and suffering, and funeral expenses for other people who are injured in an auto accident when the insured is held legally responsible for their injuries. Expenses are paid up to the limit (amount) of coverage the insured has selected. This coverage also pays the legal and court costs to defend you in a covered lawsuit. This is a required coverage in most states. In California the minimum Bodily Injury Liability limit a policyholder must carry is $15,000/$30,000- the first number indicating the maximum payout per person per accident, the second number representing the total amount the insurance company will pay for each accident.

Property Damage Liability. It pays the repair or replacement expenses for another person’s property when the insured is held legally responsible for a covered accident. Expenses for repair or replacement are paid up to the limit of coverage on the policy. The minimum limit for this coverage in California that must be carried is $5,000.

* Please impress that some insurance companies offer to combine both Bodily Injury and Property damage liability into one coverage. In these cases, the minimum limit a policyholder can carry $35,000. The coverage maximum is per accident and there is are no stipulations as to how much an insurance company will payout per person or for the property damage.

Medical Payments. This coverage protects the insured, their family and other passengers in an automobile. It pays for medical expenses, if the insured and other in an auto are injured in a covered accident. The expenses are paid up to the limit of coverage selected. It will also protect the insured and other members in the household while riding in another person’s auto.
Medical Payments coverage is to assure that there is some protection for those passengers in your auto who may not have comprehensive health insurance coverage.

Uninsured Motorists Bodily Injury. This coverage is designed to protect the insured and other passengers in the covered auto if they are injured in an auto accident by a motorist who is uninsured and held legally responsible for their injuries. It pays the medical expenses and related expenses incurred up to the coverage limits selected. It is protection against expense incurred because of other drivers who may drive without insurance.

Underinsured Motorist Bodily Injury. This coverage is designed to protect the insured and other passengers in a covered auto if they are injured in an accident by a motorist whose coverage is insufficient to cover the damages one has suffered. This policy compensates the injured party for the contrast between the injury suffered and the liability covered by the insurance of the driver at fault. It should be pointed out that underinsured coverage may have limitations that prevent the insured from receiving the full amount of coverage purchased. This is due to the reason most policies justify an underinsured driver as one with less liability coverage than the insured’s underinsured coverage limits. For example, if an insured carries underinsured coverage with limits of 15/30, and the at fault driver carried bodily injury limits of 30/60, then the insured’s underinsured coverage would not apply even if the damages were over the at fault drivers bodily injury limits. The coverage applies on most policies only when the limits of underinsured coverage exceed those of the at fault driver’s bodily injury limits. In the previous example, if the coverage limits were reversed, then underinsured coverage would apply for the insured.

Comprehensive. This coverage protects the insured’s automobile. It pays a covered auto’s repair or replacement expenses for damages caused by hazards other than a collision. These hazards usually include fire, theft, glass breakage, vandalism, wind or hail storms, or damage caused by hitting an animal. It will pay up to the actual cash value of the vehicle, minus the deductible selected.

Collision. This coverage protects the insured’s automobile. It pays a covered auto’s repair or replacement expenses for damages caused by a collision. It will pay up to the actual cash value of the vehicle, minus the deductible selected

Uninsured Motorist Property Damage. Will pay for damages to the insured’s automobile, set up to a limit, when caused by a motorist who is uninsured and held legally responsible.

Deductible Waiver. Will waive the collision deductible when an insured’s a covered auto is involved in an accident with a motorist who is uninsured and held legally responsible.

Rental Reimbursement. Will pay for use of a rental vehicle when a covered loss has occurred. Insurance companies will usually situation a daily amount limit and total day limit for this coverage. For example, an insurance company might offer this coverage with a limit of 30 dollars per day and a max of 30 days of coverage for the policyholder to use on a rental vehicle.

Roadside assistance. Will pay for basic towing, manual labor at the plot of the breakdown, gas delivery (but not the gas itself) on covered autos. This means that unlike AAA the insured must be subject to the breakdown and the vehicle must be one that is listed on the policy or a normally covered vehicle under the policy contract.