It is possible, but highly unlikely, for an insurer to cancel a policy after one accident. If the accident results in a suspended driver's license or is alcohol- or drug-related, however, there is a higher likelihood of the policy being canceled.

High-Risk Drivers

Auto insurance companies are in the business of making money, and they do so by hedging against risk. Just about every driver is in an accident at some point, so one accident is not likely to affect a policy much. However, if your recent driving record is dotted with other accidents, speeding tickets, moving violations and the like, you are categorized as a high-risk driver. Rather than dropping a high-risk policy, insurance companies often wait until such policies are up for renewal and either raise the premiums or simply do not renew them.

Do Not Drink and Drive

Nothing good comes from driving under the influence of drugs or alcohol. Insurance companies are much more likely to cancel a policy of a driver who has been involved in an accident while driving impaired. Such drivers, if allowed to retain a driver’s license at all, can expect their car insurance premiums to skyrocket. If the car insurance policy is canceled, it is often extremely difficult to find a company that provides coverage to drivers with DUI or DWI convictions.

Notice of Cancellation

Insurance companies are required by law to provide a notice of policy cancellation. You are also given a chance to make an appeal on your behalf to the insurance company. (For related reading, see "Can Your Insurance Company Cancel Your Policy Without Notice?")