How to Cancel Your Car Insurance Policy & What to Expect
There are several reasons you may want to cancel your car insurance policy, such as moving to another state or switching to a more affordable insurer. Canceling your policy doesn’t have to be a complicated process, but there are some points you may want to consider before taking action.
Canceling your car insurance policy is usually a straightforward process. Still, there are a couple of things you will want to look into before you take action. A little extra time doing this can save you money in the long run.
Insurers have varying requirements for terminating your vehicle coverage, and many require advance notice of cancellation. Some companies need as much as 30 days' notice before your final coverage date. It’s best to call your carrier to ensure you know the rules for your policy.
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You can choose to cancel your car insurance policy at any time, but it’s wise to ask your insurer about their cancellation process. This way, you’re aware of the timeline and any fees you need to pay.
People choose to cancel insurance for many reasons, including switching to a new provider, moving to a different state, buying a new car, getting married and more.
Most insurers will refund your unused premium if you discontinue coverage before your renewal date. Some issue full refunds and some may withhold a fee from the repayment.
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How to Cancel Your Car Insurance Policy
Although it isn't difficult to cancel your car insurance policy, you will want to ensure you go through the proper steps. The first step is contacting your insurer to ask about cancellation requirements.
Once you know your insurance company’s rules for canceling your policy, you can set up a termination date and submit the required documents. Each step is detailed below.
Contact your insurance company to let them know you plan to cancel your policy.
Usually, you just need to call your insurer to start the process.
If you’re switching to a provider that offers lower premiums, an insurance agent may be able to find the best deals for you. An agent may also be able to tell you your current insurer's cancellation policy.
Sign up for a new policy before completing your cancellation.
It’s a good idea to sign up for a new car insurance plan before canceling your old one. If you skip this step, you could end up with a coverage lapse.
Find out if you have to give advance notice to cancel your policy.
Some companies allow you to cancel your policy immediately, while others require as much as 30 days’ notice.
Even if your insurer allows immediate cancellation, it’s a good idea to wait until you have a new policy is already in effect. An insurance lapse could result in higher premiums in the future.
Check whether you have to pay a cancellation fee.
Some insurance companies charge a fee for canceling your plan early. This fee could be a flat rate of $50 or a short rate fee, which is usually 10% of your remaining premium.
Send a formal letter if necessary.
Some companies require a signed document, so you may have to mail or fax a letter requesting cancellation. Ask your insurer for the format for your cancellation request and where you should send it.
Request a cancellation notice.
A notice from your insurer provides proof that your policy cancellation was successful. It also tells you about the amount your insurer will refund if you prepaid premiums, minus fees.
Your policy should state whether a penalty will be applied if you cancel before your renewal date. If your plan doesn't indicate a penalty fee and your insurer charges one, you have the option to dispute it.
When Can You Cancel Your Car Insurance?
You can choose to cancel your car insurance policy at any time. Before you decide on a date, it’s a good idea to consider a few points, such as:
- Whether or not your insurer requires advance notice of cancelation.
- Whether you will have a new policy in effect in time to prevent a lapse in coverage.
With a bit of thought and planning, you can avoid fees that might occur when you cancel your car insurance. Ensuring that you have a new policy in place without a gap in coverage and double-checking your insurer’s cancelation requirements can save you money in the long term.
Reasons to Cancel Your Car Insurance
There are various reasons you might consider terminating your car insurance policy. You might have shopped around and found a lower rate, for example, or you might be rethinking your finances after a significant life change like marriage.
Below are some common reasons policy owners consider discontinuing their auto insurance plan.
You want to switch insurers to get a better deal.
Sometimes buyers want to cancel their policies because they want to transfer to a different insurer. Some providers offer multi-policy discounts if you carry additional insurance types such as homeowner’s or renter’s insurance.
You’re planning to move to a different state.
Car insurance policies are subject to state insurance laws. When you move to a different location, you may want to contact your insurer to find out if you need to change your policy.
You’ve changed your marital status.
You may wish to review your car insurance policy when you go through significant life events like marriage or divorce.
You no longer have a car.
If you don’t own a car, it’s logical that you won’t need to keep your car insurance.
You bought a new car.
You may want to consider a new insurance policy when you purchase a new vehicle, as you may need additional coverage or different options.
You want a lower rate.
You can shop around for lower premiums or contact an agent to find a great deal for you.
You’re always within your rights to cancel your car insurance policy, regardless of your reason.
What Happens When You Cancel Your Car Insurance?
Although canceling your car insurance policy is well within your rights, you must follow the appropriate process to do so. If you don’t notify your insurer you’re terminating your plan, they’ll continue to bill you for premiums.
This can lead to a history of missed payments and result in higher insurance rates for you in the future. You may want to purchase a policy with the same insurer in the future. Following the proper cancellation protocol will help you avoid a potentially costly situation.
It’s also a good idea to ask about cancellation fees and premium refunds. “Will I get a refund if I cancel my car insurance?” is a common question for policyholders who prepay their premiums.
Some insurers will refund your entire unused premium. Others may keep a portion of the prepaid amount as a penalty before returning the remainder to you.
Disputing Cancellation Fees
It’s a good idea to make sure you know your insurer’s cancellation procedures and fees (if any) and administrative costs before you terminate your policy. If you’re hit with unexpected charges, you may want to dispute them.
Start by reaching out to your provider. They can tell you the process for filing complaints and disputing charges. Make sure you keep records of any communication, like whom you’ve spoken to and when. Typically, your insurer has eight weeks to make a final decision.
Frequently Asked Questions
There are some details you may want to consider when looking into how to cancel your car insurance policy. Here are the most commonly asked questions about the process.
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