When and How to Cancel Car Insurance

Whether you're switching car insurance providers or selling a car you don't intend to drive, canceling car insurance is usually a simple process. Policyholders can cancel their car insurance policy by contacting their agent, mailing or faxing a signed cancellation request, or requesting assistance from a new carrier. However, some insurance companies may charge a cancellation fee.

If you still intend to own a car, it is always a good idea to begin coverage with another insurer prior to cancellation. Maintaining coverage will help you avoid paying large out-of-pocket expenses in the event of an uninsured accident.

When to cancel car insurance

There are several common reasons why people cancel their car insurance:

Changing car insurance providers: Shopping around may result in lower rates.
Canceling coverage that you no longer require: If you already have a subscription to another service, such as AAA, canceling a coverage feature, such as roadside assistance, can save you money.
Selling a car with no plans to drive it: You probably don't need to keep paying for car insurance if you don't own a car.

If you still want to own a car, make sure you've started coverage with another insurer before canceling your current one. A lapse in coverage puts you at risk of incurring extremely high out-of-pocket expenses in the event of an accident while uninsured. And, if you own a car, most states require some level of auto insurance.

When not to cancel car insurance

If you still own a car, it is never a good idea to cancel your car insurance coverage. Almost all states require car owners and drivers to have some level of auto insurance coverage. Before canceling your car insurance, you should always check your state's minimum car insurance requirements.

Except for New Hampshire, every state requires personal liability coverage, and several states also require personal injury protection. Personal liability coverage protects you against third-party claims for damages caused by you, whereas personal injury protection covers medical expenses and lost wages if you or your passengers are injured in an accident. Even in states where car insurance is optional, some level of coverage is still recommended if you plan to own a car.

How to cancel car insurance

Calling your insurance company or agent is the simplest way to cancel your car insurance. In many cases, a phone call is all that is required to cancel your policy or halt insurance renewal. However, some insurance companies may charge a cancellation fee and require you to sign an insurance cancellation form or letter. You may be able to avoid paying the cancellation fee if you wait until your policy expires and then choose not to renew.

When canceling your auto insurance, you should do the following:

Confirm whether your policy will be immediately canceled, as some insurance companies require 30 days' notice to cancel your car insurance without penalty.
After your request has been processed, you will receive confirmation of your policy cancellation.
If you've prepaid your premiums, see if you can get a prorated refund or use the prepayments to cover any cancellation fees.
If your reason for canceling is to switch to a cheaper provider, see if your agent can get you a lower price on your current policy. You may be eligible for discounts or consider changing your coverage limits to reduce your premiums.

Other methods of canceling your car insurance include:

Meet with your agent in person: If your agent is independent, or not affiliated with any specific insurance company, they can not only assist you in canceling your current car insurance policy, but also in finding a new policy that is better suited to your needs.
Send a signed cancellation request via mail or fax: Writing a signed letter to your insurer with your full name, policy number, and the effective date you want your coverage to end should be enough to start the cancellation process. Check with your carrier to see if a cancellation fee is required.
Request assistance from your new insurance provider: If you've switched insurers, your new carrier may be able to assist you in canceling your old policy. Your signature, prior policy number, and date of cancellation will still be required by the new agent or provider.

If you're canceling car insurance to switch to another provider, such as State Farm to join Geico, make sure you're already covered by Geico before canceling State Farm. This ensures that you are always insured and prevents you from incurring large out-of-pocket expenses if you are involved in an accident as an uninsured driver.

One disadvantage of canceling your car insurance and switching to a new policy is that you must make your first payment for your new policy before your old policy expires. This means you'll have to pay for coverage twice, but only temporarily — you can get a refund for unused premiums, but the process takes time.

You can speed up and simplify the process by doing the following:

Using a credit card to pay for insurance: Credit card refunds are usually processed faster, and the money for your next bill won't be deducted from your bank account for about a month.
Choose monthly payments: If your first insurance bill will be a financial burden, you may be able to reduce the initial cost by making smaller, more frequent payments.
Save your quote for later: Car insurance companies allow you to save quotes for later use, so you can wait until you've saved enough to cover the difference before making the switch. Most insurers give you at least 30 days, but it can be much longer — Progressive, for example, will give you up to 13 months.

Canceling auto insurance without notifying your insurer

If you cancel your policy without notifying your insurer, or if you stop paying your car insurance premiums, you may be subject to additional fees or even policy cancellation.

Reasons to notify your auto insurance provider of a cancellation:

While some carriers will cancel your car insurance policy if you do not pay at renewal, many will extend coverage beyond the end of your policy to give you more time to pay missed bills. If you do not pay during the grace period, the insurer may charge you for the coverage extension as well as nonpayment penalties.
If you pay your premiums by automatic bank transfer, insurers will continue to deduct funds from your account until you request cancellation.
Given that rates are constantly changing, you should complete any outstanding payments and cancellation fees in order to leave on good terms with your carrier. It's possible that the insurance company will offer lower rates in the future, and having a good payment history will help you get the best deal if you decide to return.

Notifying your insurer of your intention to cancel auto insurance is always a good idea.

Do insurers charge cancellation fees?

When canceling a car insurance policy or a specific coverage, most insurance companies will not charge a cancellation fee. For canceling auto insurance early, some companies may charge a flat fee, usually less than $100, or a short rate fee.

When policyholders cancel their car insurance before the policy's expiration date, insurers use a proprietary "short rate" to calculate their earned premium. The short rate is multiplied by the amount of premium left on your policy.

A 15% short rate applied to a 12-month policy cancellation nine months after initiation would be 15% of the remaining 3-month premium.
A 10% short rate applied to a 6-month policy cancellation four months after initiation would be 10% of the remaining 2-month premium.

Some insurers will waive the cancellation fee if you cancel before the policy's expiration date.

Can you cancel auto insurance at any time?

Yes, most auto insurance policies permit policyholders to cancel coverage at any time. Cancellation typically necessitates a signed form or written notice of cancellation that includes the desired policy end date. In some cases, you may be required to pay a cancellation fee as well.

Make sure to notify your insurer of the cancellation, as failure to do so may result in additional fees.

Reasons to change car insurance policies or providers

Canceling car insurance is a good idea if you intend to switch to a more affordable policy, one with better coverage, or both. Check with your current provider to see if you are eligible for any discounts that could lower your premiums before switching.

Adjustments to your coverage, such as lowering your coverage limits or dropping special equipment coverage after purchasing a new car without custom parts, can also help you save money and avoid having to cancel your auto insurance. Make sure to discuss any coverage changes with your carrier that can lower your rates while still providing you with adequate protection in the event of an accident.

It's always a good idea to shop around for cheap car insurance because you might be able to find a lower rate without changing your coverage.