When and how to cancel your car insurance policy
Key takeaways
- You should have another policy in effect before canceling your existing coverage to avoid your future car insurance premiums increasing substantially due to a lapse in coverage.
- If you are recuperating from surgery or embarking on a long vacation, you may want to suspend your car insurance instead of canceling.
- When you move to a new state, it helps to contact your insurance provider immediately to ensure that your policy aligns with the car insurance laws in your new location.
If you have ever wondered how to cancel your car insurance, Bankrate can help. The process isn’t difficult, but knowing when and how you should cancel your coverage is another matter. You may also be wondering: can I cancel my car insurance and get my money back? In some cases, you may be able to receive a refund, as we detail below. To understand what you need to know about car insurance cancellation laws so you can make the best decision for your own coverage, Bankrate created this guide with answers to your likely questions.
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Powered by Coverage.com (NPN: 19966249)
Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
What happens when you cancel your car insurance policy?
There are several consequences to canceling your car insurance. The most important, of course, is that you will not have insurance coverage unless you purchase a new policy in a timely manner. This can result in fines and other penalties, since a minimum amount of car insurance coverage is mandatory in almost all states (New Hampshire is the holdout). These penalties could include suspension of your license and even jail time.
Lack of coverage also leaves you vulnerable to the costs associated with an accident if you are found to be the cause of one. If you are behind the wheel without coverage and cause an accident, you would be required to pay out-of-pocket for injuries and damage—which could be significant after a serious accident.
A lapse in coverage may also make it more difficult for you to purchase a new policy when you choose to do so. You may lose discounts, such as loyalty discounts, if there is a gap between your old policy and the new one. And if you’ve been without insurance long enough, some providers may consider you a higher risk, which usually means higher rates.
How to cancel your car insurance
Understanding how to cancel your insurance policy isn’t difficult. Although every car insurance company has its own procedures, it should be fairly simple to contact the company and begin the process to end your coverage. However, note that every state does have regulations regarding when you should surrender your license plates (if you’re not getting a new policy)—whether it’s before or after you cancel your existing policy.
Below are some steps you should consider taking to successfully cancel your policy.
- Purchase new coverage, if you will be driving again. This should be done before you cancel the old policy, to avoid a lapse in coverage. A lapse could increase your coverage rates.
- Connect with your insurer. Contact your company via email or postal mail or call your local agent to ask for your policy to be canceled. Find out if you need to pay a cancellation fee, or if you are likely to receive a refund for unused premiums. There may also be other requirements, such as giving 30 days notice.
- Sign a cancellation letter, if required. Not all insurers ask for this step, but if it is required, it will likely contain information about your policy and the amount of time left on it.
- Request a policy cancellation notice. You may receive this automatically, but if not, you can request it.
When you should cancel your car insurance
For drivers making a carrier switch, purchasing a new policy ahead of your current policy’s expiration is a good practice. If you are making a permanent cancellation, consider talking through your situation with an insurance agent to make sure that missing coverage will not put you at legal or financial risk.
When you move
If you move to another state where your current insurance company does not offer coverage, you will need to get a policy from an auto insurer that offers coverage in your area. Arrange for the new policy a few weeks prior to ending your current policy to avoid a lapse in coverage. Some states, like New York, require drivers to surrender their license plates before canceling car insurance, even if it is for an out-of-state move. In these situations, you may need to have a few days of overlapping insurance to avoid state fines.
When you do not have a car
When you sell a vehicle with no plans to replace it, you can cancel your auto insurance. However, it is usually a good idea to hold off on discontinuing coverage until the new owner takes possession and the title is transferred to them. Check with your local DMV to see if you are responsible for turning in your license plates or if they stay with the new owner. If you plan on getting a new car within a few months of selling your old one, you may want to speak with an agent about converting your policy to a non-owner policy. This may help you avoid an insurance lapse, maintain the policy discounts you earned with the company over time and avoid a possible rate increase.
When you want a better deal
You may decide to switch your auto insurance provider to get a better rate. Again, it is usually a good idea to secure a new policy before dropping your current coverage. Having the start date of your new policy match the intended cancellation date of the old policy is the best way to ensure there will be no lapse in coverage. Experts recommend shopping for a new insurance company at least six to eight weeks before your coverage is set to expire.
When you want to reduce coverage
If you have an older vehicle you own outright, you might consider dropping optional collision and comprehensive coverage. Consider the risks beforehand, though. It is important to note that if you discontinue collision and comprehensive, you will likely have to pay out of pocket if your car is damaged or stolen, so you need to be prepared financially. This would be considered a policy amendment, not a policy cancellation.
When you’re covered under someone else’s policy
You may wish to cancel your insurance if you are a member of a household where another person has coverage and you can be added to their policy. This is most likely to be the case if you get married, but could also be appropriate for adult children moving back home. Adding a driver to an existing policy might increase your premium, but there may also be discounts available to help mitigate the increase.
Keep in mind that insurance follows the vehicle, not the person, so if you drop coverage on your car by canceling your policy, you’d need to add that vehicle to the other person’s policy to ensure financial coverage. Thankfully, a multi-vehicle policy usually results in a discount.
When you should not cancel your car insurance
While you can cancel your auto insurance anytime, you may not always need to. Before canceling your coverage, it might help to think through why you no longer need insurance and create a strategic approach to prevent potential legal or premium-related issues.
When you will be driving
Canceling coverage on a vehicle you still plan to drive is not the best idea, as it could put you at financial risk and potentially violate state laws. Speak with a licensed insurance agent to learn more about how driving your vehicle without insurance could affect you.
When you move
Moving does not automatically require you to get a new auto policy. Before moving, contact your current auto insurer to find out if you can transfer your coverage to the new state. Moving can cause your rate to change because location is a factor in determining premiums. If your current insurance company operates local agencies, you might need to work with a new agent, as well.
When you get married or divorced
Getting married or divorced usually indicates that a policy review and changes are needed. You can add a new spouse to your current auto policy and may even earn a discount for tying the knot. You could potentially also qualify for a multi-policy discount if you and your new spouse have insurance with the same company. If you get divorced, you can typically remove your ex-spouse’s name from your current policy instead of canceling the policy altogether.
When you are only temporarily not driving
If you plan on taking a break from driving for an extended period, some car insurance companies will allow you to suspend your car insurance and put your vehicle on a storage plan. In some places, you will have to send a written request for suspension or cancel your license plates, while in other states you can simply call your agent. If you cancel your insurance policy instead of suspending it, your insurance company will likely view this break as a lapse in coverage and your insurance premium may increase when you purchase a new policy.
When your premium is high
A high premium does not necessarily mean you need to cancel your coverage. Most auto insurers offer several types of discounts. You may qualify for a discount for driving safely, taking a virtual driving course or reporting your car’s safety features, such as airbags or anti-lock brakes. Contact your agent to find out how discounts can lower your rate and which ones you may be eligible for that you aren’t currently taking advantage of.
If I cancel my auto insurance, will I get a refund?
If you paid your premium in advance and cancel your policy before the end of the term, the insurance company might refund the remaining balance. Most auto insurers will prorate your refund based on the number of days your current policy was in effect.
The insurance industry is highly regulated, and each state has insurance statutes that govern how companies must handle refunds. In Nebraska, for example, an auto insurer must contact you within 15 business days of cancellation to inform you about any eligible refunds. In many states, like Texas, if you finance your premium through a premium finance company, the insurance company may return the unused premium to the finance company, not you.
Unless otherwise stated in a statute, auto insurance companies usually do not have the obligation to refund your money within a given time period. To avoid refund headaches, it is best to notify your auto insurer of your plans to cancel when it is almost time to renew. Check with your carrier before canceling to learn more about its insurance cancellation policy.
Car insurance cancellation fees
Depending on the auto insurance company, canceling your policy before the end of its term may result in a cancellation fee. State laws can determine if a fee is allowable. If so, it is up to the insurer to set that fee, which is often taken out of the prorated refund.
Cancellation fees can be a flat fee or a short-rate fee. With short-rate cancellations, the insurer will charge the policyholder a percentage of the unearned premium — usually 10 percent. This amount will be taken from the remaining refund, or the policyholder will receive a bill if there isn’t a refund owed.
What happens if you stop paying your premiums without canceling your car insurance policy?
If you want to discontinue your coverage, it is best to contact your insurer or your agent. If you stop paying your premiums but do not cancel your policy, your carrier will eventually cancel your policy for nonpayment. However, there may be charges for insurance coverage up until that point, along with possible late fees.
Failing to properly notify your insurer that you want to cancel may even impact your ability to locate auto coverage in the future. Even if you intend on finding a new car insurance company, missing payments entirely could lead to poor payment history and make securing affordable rates more difficult. Similarly, if you have automatic bank account withdrawal enabled to pay your premiums, you may continue to pay for coverage that you do not intend to keep.
Notifying your insurance company of your intent to cancel, along with providing a specific cancellation date, allows the insurer to follow the appropriate cancellation procedures — such as notifying the DMV of the cancellation on your behalf and starting any refund process.
Frequently asked questions
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Because gaps in coverage may negatively impact your future premium, foregoing auto insurance — even for an extended vacation — likely is not worth it. If you plan to be away for a month or longer and your vehicle will not be in use, there may be other ways to save on your premiums without canceling your policy. Experts recommend speaking with an agent to learn about your options.
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When you move, you will need to register your vehicle in your new state of residence and purchase a policy that aligns with the state’s auto insurance laws. Many major insurance providers operate in most U.S. states and Washington, D.C., so you may be able to stay insured under your current carrier, although your rates will change even if you move a short distance. If you do need to find a new insurance carrier, shopping for quotes and securing coverage before you move to another state can make the transition easier.
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Some drivers choose to drop additional coverage types, such as optional comprehensive and collision, after they pay off their vehicles. This may be more suitable for drivers with older vehicles who would pay more in premiums than it would cost to fix their damaged cars. In cases like this, you may consider dropping non-essential coverage and keeping liability-only policies.
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Yes, your insurance company can cancel your coverage. If you do not pay your premium on time, lie on your auto application or your driver’s license gets suspended or revoked, your insurer could cancel your policy. If this happens, you can ask your insurer if there are steps you can take to reinstate your policy. If reinstatement isn’t possible, you may shop for a new carrier before the policy cancels to avoid a lapse in coverage, which can cause your rates to increase.
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Not necessarily. As we noted above, if you are selling your car and immediately purchasing a new one, you may be able to transfer your policy to the new vehicle, keeping in mind that your rates and coverage needs will change. If you prefer to change to a different company at that time, just be sure there is no gap in coverage between the selling of the old vehicle and purchase of the new one. If you will be driving in the future, but not in your own car, a non-owner policy may be the right choice for you. If, however, you will not be driving any more, you can cancel your policy outright, since you will not need coverage in the future.
