Your new auto insurance company is checking you out during your first two months under its policy. It reviews your driving record to determine if it wants to take on the risk of insuring you. It checks all the information provided in your initial application. During this period, the company can cancel your policy for any reason, such as misrepresenting facts in your initial application.

Midterm Cancellation

Auto insurance policies typically are in effect for six to 12 months. After the first 60 days, most states require that the insurance company have a valid reason to cancel your policy in midterm. Most states allow midterm cancellation for failing to pay premiums, filing a fraudulent claim, being convicted of drunk driving or having your driver's license revoked. Some states also allow cancellation of your policy if you are diagnosed with a physical condition that makes you a more dangerous driver or you are convicted of a felony.

Nonrenewal

Insurance companies also can refuse to renew your policy at the end of the contract period. Insurance companies are for-profit businesses; if you become unprofitable or become so risky they fear you will be unprofitable, they may refuse to renew your policy. You can become unprofitable if you file too many claims or receive too many speeding tickets, for example. To avoid non-renewal, consider fixing your car yourself if you've had a minor fender-bender, rather than filing a claim. This is especially true if you've filed a claim previously or had a traffic ticket recently.