Whether you are switching carriers, moving to a new state or selling your car, canceling your car insurance is a relatively easy process. However, canceling car insurance at the wrong time can be costly. Here is a look at how to cancel car insurance — and things to consider before you do.

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How to cancel car insurance

You can cancel your car insurance policy at any time, and it’s usually as simple as calling your agent or carrier. In most cases, you can either cancel immediately or schedule the policy to end on a future date.

If you’re switching carriers or moving to a new state, you want to keep your existing policy in force until the start date of your new policy. Your existing coverage ends at 12:01 a.m. on the cancelation date. Your new coverage begins at the same time on the first day of the policy period.

Some companies will ask for a written cancelation request by email or fax. If you manage your policy online, you can usually submit your request from your account page on the insurance company’s website.

You’ll usually get a cancelation notice within a few days, if not sooner. If you don’t, follow up with the agent or customer service to make sure the request went through.

Insurance cancelation fees and refunds

If you cancel your car insurance before the policy term ends, you’re entitled to a refund of any premiums you’ve already paid for coverage beyond the cancelation date, minus a fee to cover your policy’s administrative costs.

This administrative fee can be up to 10% of the premium for the remainder of the policy period, depending on the carrier and your state’s regulations. If you’re behind on your insurance payments, you’ll still need to pay for coverage up to the cancelation date, plus the administrative fee.

Canceling insurance to switch carriers

If you’re switching carriers, lock in the rate and start date for the new policy before you cancel the existing policy. A quote is not a guarantee. The rate you see when you are shopping could change for a variety of reasons. For example, if your driving records reveal a ticket you forgot to mention in your quote request, your final rate will be higher than the one you saw in the quote.

However, it is rare for your rate to change after you bind the policy, which is usually also when you set the policy’s start date and make your first payment. If your vehicle is financed, be sure to provide your lender’s name and address to your new agent or carrier. This will allow the insurance company to notify the lender about your new policy, so you won’t have to do this yourself.

Once you’ve confirmed the rate and start date, you can have your existing carrier cancel the “old” policy on your new policy’s start date. Your new agent can also cancel the old policy for you, but he or she will usually need you to provide written consent.

How to switch car insurance:

  • Review quotes to find the best coverage and rates
  • For financed vehicles, provide lender information to the carrier you choose
  • Bind your new policy, which usually requires an initial payment
  • Schedule your existing policy to end on the new policy’s start date

Canceling insurance when selling a car

Whether you are selling the only car you own or just getting rid of a car you no longer need, you should keep the vehicle insured until the sale is final. You want the coverage in place to cover people test driving the vehicle. And what if the planned sale falls through?

In most states, the car is no longer your responsibility after you and the buyer sign a release of liability. After this, you can ask the insurance company to remove the car from your policy.

If you’ve sold the only car you own, there are scenarios in which it might make sense to keep your insurance policy in force. They include:

You are buying a replacement vehicle soon

Insurance companies tend to give better rates to those who maintain continuous insurance coverage. Most will allow you to retain your tenure and discounts under a non-owners policy, and this usually results in more favorable rates when you add a vehicle back onto the policy.

You often borrow other vehicles

If you plan to borrow other people’s cars, having a non-owners policy could protect you from large liability claims. The vehicle owner’s policy usually provides primary coverage, assuming you’re not an excluded driver. However, you could be responsible for costs exceeding the vehicle owner’s policy limits.

Changing insurance when you move

Since state insurance laws vary from state to state, it’s best to purchase a policy in your new state at the earliest opportunity.

Your existing policy will remain in effect until you cancel it. However, depending on your new state’s insurance laws, it might not provide the right type of coverage.

For example, in most states, a person injured in a crash caused by another driver can file a liability claim with the at-fault driver’s insurance carrier. However, drivers in no-fault states need personal injury protection to cover their own medical bills, regardless of who causes the accident. So, even if you meet the insurance requirements in one state, you might have a huge gap in another.

Most states give you 30 to 90 days to obtain a new driver’s license and register your vehicle or vehicles, but you can get your new insurance policy before that. Many states also require you to show proof of insurance to register a vehicle, which is another reason to get that new policy.

If you’re moving in-state, you won’t have to cancel your policy. Just let your agent or carrier know your new address. Your carrier will adjust your rate — up or down — to reflect the insurance costs for your new ZIP code. But you won’t need to change anything else.

Canceling coverage on a stored vehicle

If you have multiple cars on your policy, you can usually obtain comprehensive-only coverage on a vehicle you no longer drive, or only drive on an extremely limited basis.

Comprehensive-only coverage tends to be inexpensive and covers damage from any cause other than a collision. This includes theft, vandalism and damage caused by animals, fire or falling objects.

Just remember to restore the rest of the coverage you had on the vehicle before you take it back out for a drive.

If the stored vehicle is the only one in your household, it might be more difficult to obtain comprehensive-only coverage. Insurance companies operate under the assumption that their customers regularly drive at least one of the vehicles they own.

The risks of policy lapses

The biggest downsides to letting your policy lapse include not having coverage and being charged higher car insurance rates when you shop for a policy in the future.

  • No coverage: The risk of being involved in an accident won’t go away just because you plan to buy a new policy when you can afford it again or intend to sell your car in a few weeks. Without insurance, the costs of a car accident claim can be devastating. It’s also illegal to drive a car without insurance in most states.
  • Future shopping difficulties: Customers with continuous coverage tend to get better rates. Some carriers won’t insure a driver with a lapse for any reason.

If you have to cancel, it’s always better to terminate the policy yourself than to just ignore your bill. Insurance companies are typically required to keep your policy active during a grace period for late payments. If the grace period ends with no payment, you’re still responsible for unpaid premiums during the entire time the policy was in effect, which will now include the grace period.

Plus, when you buy insurance again in the future, carriers tend to give those who canceled a prior policy better rates than those whose prior policy was canceled for nonpayment.

Canceling insurance on a financed vehicle

Canceling insurance on a financed vehicle without a new policy in place is never worth the hassle. Your lender technically owns the car until you’ve paid off the loan and requires insurance coverage to protect its investment.

When you cancel your car insurance, the insurance company will notify the lender. Unless you have a new policy in place, the lender will obtain coverage through a process called forced-placement or collateral protection insurance (CPI). This can also happen if you remove lender-required coverages, such as collision or comprehensive coverage, from the policy.

CPI tends to be more expensive than insurance available through normal consumer channels. You’ll have to either pay these premiums or find a cheaper policy yourself.


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