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How to Cancel a Car Insurance Policy

Are you thinking of canceling your car insurance policy? Here’s how to do it, how much it costs, and when to avoid it.

Toy car cupped between hands

If you want to switch to a new insurance company or get rid of your auto insurance altogether, you’ll have to cancel your existing policy. You can do this by requesting a cancellation from your current insurer. If you don’t notify your current insurance company, you could face high fees and a bad reputation with future insurers.

That’s why it’s important to know how to properly cancel your car insurance policy. This article outlines the steps you need to take to cancel your policy, as well as:

Canceling Your Car Insurance

So, you’ve decided you want to cancel your car insurance policy. What next? These are the steps you’ll need to follow to cancel your current policy:

  • Make sure you have insurance with another company before cancelling your policy. Otherwise, you could face a lapse in coverage (unless you’re quitting driving completely).
  • Let your insurance agent know in person or call your insurance agent or company to inform them of the cancellation.
  • Fill out an insurance cancellation form.
  • Make sure all bills are paid and, if applicable, you’ve paid your insurer’s cancellation fee.

You’ll need to purchase a new auto policy before canceling your current one. Unless you’re giving up driving altogether. Driving without insurance is illegal. You can get hit with a hefty fine for doing it. Each state issues different fines and penalties for driving without insurance. Check with your state department of insurance for more information.

Can You Cancel Your Car Insurance at Any Time?

Before canceling your coverage, read the fine print of your car insurance contract. Is your policy expiring in a month? Or is it expiring in six months? If it’s the former, you probably should hold out another month—especially so you don’t have to pay a fee.

But if it’s the latter, don’t feel obligated to stick with your current plan. It’s easy to remove yourself from your current policy. Just take into consideration the fee you’ll most likely have to pay.

Also, look into whether you’ll need to fill out a cancellation form or craft a letter of resignation. Your provider may only require filling out a form. However, it’s always best to write a letter or stop into your agent’s office. It’s much more personal and clears up any questions either of you may have.

Also, keep in mind you may need to give at least a 30-day notice, depending on the insurer.

Refunds for Early Cancellations

Most insurers will provide a pro-rata cancellation refund, or a short-rate fee.

  • Pro-Rata Cancellations: What if you decide to cancel after paying this month’s premium? Insurers charging you a pro-rata fee will only charge you for the part of the month that the policy was active. Your insurer will reimburse you for the unused portion of the premium.
  • Short-Rate Cancellations: Some insurers charge a fee for the administrative costs of canceling a policy early. This can be up to 10 percent or more of a policy. It will be subtracted from the refund total.

When you receive refund, it might come as a check in the mail. Or it may be directly deposited into your account. The amount of time it will take to receive it depends on your provider and when you cancel it. Most insurers send out refunds within two or three weeks of cancellation.

When to Cancel Your Auto Insurance Policy

There are several reasons you may want to cancel your auto insurance policy. Scenarios that would lead someone to cancel their policy include:

Selling Your Car

If you’re getting rid of your car, you may consider getting rid of your insurance policy. If you’re giving up driving entirely, you won’t need to have another policy waiting.You can always change your insured vehicle on the policy and stay with the same company if you got a new car. But if you find that your insurance rates will drop with a different company, it's easy to make that move.  Make sure you have insurance when you switch, otherwise you could face a lapse in coverage.

Switching Insurance Companies

Maybe you found a better deal elsewhere and want to change your policy to a different car insurance company. In that case, you’ll have to purchase your new plan before you cancel your current one. That’s because you run the risk of facing a lapse in insurance if you don’t have a policy in line.

Other Changes That Impact Your Rates

If something major changes in your life, it could impact your rates, for better or for worse. These are some changes that may make you reconsider your auto insurance policy:

  • Moving homes
  • Purchasing a new car
  • Getting a DUI or other major citation
  • Adding or removing a driver to/from your policy
  • Marriage or divorce
  • Changes in your credit score

If you’re unsure about whether you could be saving money on auto insurance, shop around by comparing quotes from different insurance companies. Things like buying a safer car or moving to a different location could cause your prices to decrease, and you want to make sure you’re getting the best deal.

Auto Insurance Company Cancellation Fees

Car insurance companies have different policies surrounding cancellation fees. Many carriers charge a fee when canceling a policy early. It ranges anywhere from no charge, to 10 percent of the cost of the policy, to a flat rate of $50 or more. These charges vary depending on the state you live in, as well as your specific policy and situation. Be sure to check with your insurance agent to verify how much you’ll be charged for canceling your policy. In general, this is what you should expect for cancellation fees if you’re insured by one of these top companies:

Company Cancellation Fee
Geico $0
Progressive $50- $65
State Farm $0
Allstate $0
Nationwide $0

Curious to know how much you’ll have to pay? Check with your insurer or read your contract. Each company charges a different amount.

What Happens if I Just Stop Paying for Insurance?

If you’re considering canceling your policy, it could be tempting to just stop paying for it. There are several reasons why you shouldn’t go down that road. If you’re thinking of canceling your current auto insurance policy, you’ll have to let them know before you just up and leave. Fortunately, it’s easy to remove yourself from your policy.

Leaving without informing your insurer could cause lasting consequences. Even if you’ve already purchased a new policy at a different company, you’re still obligated to pay for your previous policy. If you don’t, they’ll cancel your policy. And that increases your risk level in the eyes of insurers. That, in turn, can make car insurance companies charge you higher rates.

Can You Cancel a Policy Early If You Have a Pending Insurance Claim?

You’ll need to wait until you pay your deductible and your claim is paid out with your old company. The reason being because new insurers won’t want to pay out an old claim. They don’t want the financial burden of paying for your losses.

Are There Any Circumstances Where You Should Not Cancel a Policy Early?

Don’t cancel your old car insurance policy until you buy a new one. Driving without insurance is illegal.

Another reason not to cancel your old policy before you get approved for a new one? The new company may reject you and you’d be left without coverage.

Also be weary of canceling a car insurance policy right after you buy it. There are often increased fees for canceling it early in the term.

When Is the Most Ideal Time to Switch Insurers?

The best time to switch policies is during the renewal period, rather than mid-term. Just remember to notify your insurer that you aren’t renewing.

Forget to do this and your policy may automatically renew. Also, fail to pay because you thought you canceled, and it’ll be canceled for non-payment. That will go on your record, and it can affect your insurance score. To avoid this, stay on top of the cancellation process and all due dates.

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