How to Cancel a Car Insurance Policy
For one reason or another, you may need to cancel your auto insurance policy. Learn how to do it without fees or a coverage lapse.
Cancelling your car insurance policy is usually a simple process. You’ll contact your auto insurance provider, fill out the necessary paperwork, pay any fees and you’re done. You can cancel your auto insurance at any time, but be aware of the times when you shouldn’t cancel your policy. Even if you don’t drive a lot, auto insurance is required. This article will cover:
- Car insurance cancellation process
- When to cancel your auto insurance
- When you shouldn’t cancel a car insurance policy
How to cancel your car insurance
The process for cancelling your auto insurance policy is fairly straightforward. You’ll want to:
- Compare auto insurance quotes and find a new policy.
- Notify your old insurer about the cancellation.
- Pay off your premium balance and any fees.
- Get your cancellation documents and any refund.
Get your new policy first
If you’re moving to a new auto insurance provider, make sure you have a new policy in place before cancelling the old one. Even one day without auto insurance coverage is an unnecessary risk. If you are involved in an accident during that lapse, you will not be covered in the event of injuries or property damage you may cause.
Furthermore, auto insurance companies tend to charge more after a coverage lapse. This means you’ll probably see higher rates when you buy car insurance again. If you’re going to stop driving completely, you do not need to have a new policy in place until you decide to start driving again. However, keep in mind that doing so will lead to an insurance lapse, which can cost you.
Notify your old auto insurance provider
Notify your old car insurance company when you want to cancel your policy. You can do this by email or phone. You can also go in person to your insurance company’s local office (if it has one) to cancel your policy, but an email or phone call is usually sufficient. Just so you know, auto insurers sometimes require a 30-day notice of cancellation. This will probably be detailed on the declaration page of your car insurance policy.
Depending on your auto insurance company, they may require you to fill out an auto insurance cancellation form. Fill it out and return it as quickly as possible. The agent you’re working with should let you know about any time limits on returning the cancellation form.
Some insurers may offer to cancel your old policy when you buy a new one through them. They will need your policy number, effective dates and your cancellation letter. Still, it may be better for you to do it yourself for peace of mind.
Pay off your car insurance premium and fees as needed
Make sure all your premium balances and required cancellation fees are paid on your old policy. Some car insurance companies have a short-rate fee for cancelling your policy before its expiration date comes to term. The fee may be a percentage of your remaining premium (often a minimum of 10%) or a flat rate. The fee type can probably be found on your declaration page as well.
Receive your insurance cancellation letter and refund
Once your auto insurance cancellation is finalized, you will receive an auto insurance cancellation letter, as well as any refundable amounts sent to you via check or direct deposit, minus fees. If you paid for the full year of coverage, the refund will be based on the unused portion for the year. If you pay monthly, you will be refunded for the days remaining in the month.
Why an auto insurance lapse is high risk
If you’re cancelling your insurance, be aware of what comes with an insurance lapse. The danger of an insurance lapse doesn’t end with not having coverage. Driving without insurance is illegal, even if it’s only for a day. Depending on the state you live in, the penalties for driving without insurance may include the suspension of your driver’s license, which could result in more fees and require an SR-22 filing.
If you have leased a car, your financial institution will probably be on your policy as a loss payee. This means they’re notified when changes to your policy are made. They will know if you have no coverage. This could result in repossession of your car if you don't get insurance within a grace period.
Certain states have penalties for lapses in coverage. You may have your driver privileges revoked. You’ll likely have to pay a fine and fees in order to get them back. If and when you get insurance again, you’ll probably face higher rates due to your previous lapse in coverage.
When can I cancel my auto insurance?
You can cancel your car insurance at any time.There are many good times to cancel your current car insurance. They include:
- You find a better auto insurance quote.
- You buy a new car and need new coverage.
- You get married or divorced.
- Your credit score changes.
If you decide to cancel your current auto insurance, find out when your policy expires. If your expiration date is coming up soon, it may be worthwhile to hold out until your renewal period to cancel in order to avoid any fees.
If you have an auto insurance claim pending at the time, you can still cancel your current coverage. As long as you had car insurance at the time of filing the claim, you are not obligated to wait to cancel your policy if you find a better option.
When shouldn’t I cancel my car insurance?
There are some times when cancelling your auto insurance policy isn’t the best idea. Timing is a crucial element of making sure you don’t have to pay more in fees than you have to.
If you’re cancelling your auto insurance because you’re getting rid of a car, make sure to maintain your coverage until the title is signed over to the new owner. You are responsible for the liability and property damage caused by the car until someone else legally owns it, and you’ll want to protect yourself until then.
If you have a car in storage, you still need to maintain auto insurance coverage on it. As long as your car is registered to you and has a license plate, it needs to be insured.
Even if you rarely drive, you’ll want to maintain basic auto insurance. Driving uninsured — even only sometimes — is still illegal. Ask your auto insurer what they offer in terms of coverage for occasional drivers.
Finally, if you move to a state like New Hampshire that doesn’t require you to carry auto insurance, you are still obligated to be financially responsible for any injuries or property damage you may cause while driving. Compared to many states’ alternative coverage options, maintaining your auto insurance is usually the best way to go.
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