When you need to shop around for auto insurance, there’s plenty of information online about the best car insurance companies and how to get cheap car insurance. But what if you already have car insurance and want to know more about canceling the policy or the rules you need to follow before canceling?
Read on to find out how and when to cancel car insurance while avoiding any fees or penalties that may arise from cancelling.
Common reasons for termination of insurance coverage
Auto insurance, even the simplest policy, exists to protect the driver from financial liabilities that may arise from a car accident. In fact, there are laws that require drivers to have a minimum amount of car insurance.
However, even though auto insurance is a requirement in almost every state, there are still many circumstances in which canceling your current insurance coverage makes sense.
Switching to a new insurance company
There are several reasons why you would want to change auto insurance companies. Maybe another insurer offers better rates or you had a bad experience with your current agent or provider.
Either way, if you want change car insurance, it’s best to shop around and consider multiple companies. You should compare each company’s coverage options and rates to make sure they fit your insurance needs and budget.
Leaving the state or country
If you no longer reside where you purchased coverage, you will need to cancel or change your policy. You cannot have auto insurance in one state while living in another. Moving to a new state requires a change to your insurance, so you may want to consider purchasing a policy in your new location before getting rid of your current coverage.
You may incur cancellation charges if you do not notify your auto insurance company within a specified time. If you’re going to live abroad, your insurer can tell you your options and responsibilities, when to cancel your current policy, and what to expect.
No longer own a car
If you no longer need a car, there is no point in paying for insurance. However, be sure to keep your car insurance active if the car is still in your name. Even if you don’t drive it, you’re probably required to maintain coverage on a vehicle to avoid fines or a suspended license.
5 ways to cancel your current car insurance policy
Once you’ve decided to get rid of your car insurance, it’s time to think about how. There are a variety of ways to do this, but they all follow the same process; what varies is the method.
1. Cancel in the app
You may have to look in the settings, but most insurers allow you to start, change, and stop coverage in their mobile app or online. As with any policy change, be aware of the terms and conditions. Some insurers may require a signature to deem the policy fully void or require additional steps beyond the simple click of an app button.
2. Call your insurer
Most insurance companies have a toll-free phone number or live online chat option that connects you with a customer service representative. These service professionals can advise you on how to cancel your policy and any cancellation fees or refunds that may result.
3. Send your cancellation request by mail
It may sound old-fashioned, but sending a car insurance termination letter also works. A car insurance cancellation letter should be sent by registered mail so that you have proof that you sent it and that you are notified when the company has received it. List your relevant biographical information, policy number and any dates that come into play, and be clear about your desire to cancel.
4. Visit your local insurance office
If you prefer to process the cancellation in person, you can go to the insurer’s local office, if they have a physical location. Bring any identification and documents you may need. A face-to-face meeting with a company representative can help you better understand the cancellation process and clarify any questions you may have.
5. Let your new supplier start the cancellation process
If you’re leaving your current insurer because you’re taking out a policy with another company, you can let your new provider handle the cancellation. You will still have to participate in the process, but at least you can avoid a gap in coverage.
What to keep in mind before canceling your policy
If you cancel your car insurance, do you get a refund?
Depending on your coverage, you may have noticed the policy terms regarding unused premiums. Having unused premiums means that you have already paid into the policy without using it and that money can be refunded.
You should be aware that your insurance provider may use something called “short-term cancellation” if you cancel abruptly (without the proper notice period). This means that they will deduct 10% to 15% of your unused premiums before getting your refund.
For example, if you paid $1,200 for a 12-month policy but canceled it after the fourth month, you have $800 in unused premiums. In the event of a short-term cancellation, your insurer may deduct 10% of the $800, bringing your refund to just $720.
Car insurance cancellation fees are another reality of business and something you will likely encounter, depending on the status of your account at the time of cancellation. These charges are generally based on the percentage of time remaining on your current policy, although they vary from insurer to insurer. The best way to avoid charges is to give your current insurance company sufficient notice before canceling, as defined by the terms of your policy.
How much time do you have left on the policy
A copy of your provider’s auto insurance cancellation policy is needed so you know your rights as a consumer. If you find the original terms of the policy, you can determine the remaining term of coverage. If you can’t find your policy papers, your first step should be to get a copy from your insurance provider. Once you’ve figured out how much time is left on the policy and how much you’ve already paid, you can start looking at your cancellation options.
If you are about to lose your coverage
If you are nearing the end of your coverage period, you may be in luck. If your new policy is in place or you have sold your car, there is no need to renew your old policy. Just be aware that you should be covered at all times, both legally and for your own well-being, if you are still the title holder of the car.
But what if your current insurer terminates your policy first?
If your provider cancels your policy, you no longer have to worry about canceling it yourself. But getting car insurance after a cancellation can be tricky. If the idea of suddenly losing your cover bothers you, rest assured: your insurer is legally obliged to inform you before withdrawing from your policy.
But why would a company voluntarily cancel your policy? There are a few basic scenarios:
- If an insurer determines that you have filed a fraudulent claim, you will be kicked out of your policy immediately. Your insurer will also have grounds to file a complaint.
- If you cannot legally drive – due to a medical diagnosis, a DUI (driving under the influence) conviction, or a suspended or revoked license – your policy may be voided by your insurer. Possible medical reasons include seizures, blindness, and other similar conditions.
- If your policy application is incorrect or you left something out, your provider may drop you. This is called “misrepresentation” and can result in the immediate cancellation of your policy.
- If your insurer cancels your policy because you haven’t paid your premiums, make a payment and call the insurer as soon as possible. If it’s too late and your policy has already been terminated, you can apply to have it reinstated. The reasons why you missed the premium, how long you’ve been with the company and how many lapses your policy has received will all be part of the insurer’s decision to reinstate you – or not.
Remember that insurers are in the business of risk – assessing it and mitigating it. Your best hope of keeping your insurance is to be considered a low-risk customer by having a clean driving record and paying your premiums on time.
If the company does not reinstate you, you may need to research companies that are open to high-risk drivers. You may experience difficulty finding a reasonable price down the line if any of the above scenarios occur.
Be careful when canceling your insurance
What happens if you cancel your car insurance? After making sure there won’t be any gaps in your cover and giving your provider proper notice (as outlined in your policy terms), you may end up with a refunded premium. Or depending on your situation, it may be worth paying a cancellation fee or taking short-term cancellations.
As with any contract, you want to get your hands on your policy first before you do anything. You can find it on the company’s app, online, or by calling or talking to your insurer. Since there is so much inscrutable language in most contracts, clarify anything uncertain by asking insurance agents all the questions necessary to make the best and most informed decision.