Can you cancel your car insurance before it starts?

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Joel Ohman
Founder, CFP®

UPDATED: Jan 14, 2019

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Here's what you need to know...

  • You can cancel your insurance at any time
  • There may be fees associated with canceling
  • There are penalties for having a lapse in your insurance

With insurance, you are not locked into a long-term contract. Insurance companies allow you to cancel your car insurance at any time.

Before you cancel your insurance it is best to check your insurance company’s policy on cancellation. There may be penalties or administrative fees associated canceling your policy before your renewal.

Other than that, your insurance company owes you any unearned premium at the time of your cancellation.

It is best to check with your company to find out how long it will take for you to receive a refund if you are owed any.

If you also want to check on the best auto insurance rates, start comparison shopping by entering your zip code above!

Reasons You Might Cancel Your Insurance

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Life happens and there are many reasons why you might need to cancel your insurance before your renewal.

Reasons can include the following:

You’re getting rid of a car

Whether it’s your only car or one of multiple, you definitely don’t want to keep insurance on a car that you are getting rid of.

Talk to your insurance company about the best way to go about removing coverage from your vehicle.

If you are simply exchanging your old car for a new one, it’s best to keep insurance on the old car until you put insurance on the new one to avoid lapses.

Your car broke down or is in the shop

 It is tempting to want to remove coverage from your car if it is temporarily not working.

Unfortunately, the lapse in coverage could have consequences later.

Your insurance company may have options for you that allow you to pay a smaller bill but still keep basic coverage until your car is back on the road.

Your car is seasonal

 Many people have seasonal cars that are only driven for some or part of the year.

Many insurance companies have special options for seasonal vehicles so that you are not paying a big bill while you are not driving them but you also avoid having a lapse in coverage.

Found cheaper insurance elsewhere

It’s always best to give your current insurer the chance to match a cheaper quote.

In the case that they can’t, be sure that you purchase the new insurance before you cancel with your current provider.

Purchasing new insurance before canceling ensures that there are no lapses in coverage for you.

Your new job is paying for your insurance

You may be one of those rare folks whose job has taken over the insurance payments for you!

This is definitely a rare occurrence, but if this is the case you can always cancel your current insurance for a refund.

If you are ever back in the market for insurance, there are some companies who may not penalize you for your lapse as long as you have some sort of proof that your insurance was covered by your company.

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Always Have Insurance In Place Before You Cancel

You should never be with car insurance on the road. If you are going to cancel your current car insurance, you need to have new insurance in place first.

There are many consequences to having a lapse in your insurance coverage, such as:

Tickets and Fines

There are tickets and fines for driving uninsured, no matter how long of a gap it is.

In the case of an accident or getting pulled over, you are required to show proof of insurance. If you are unable to provide proof of insurance, you will be issued a ticket.

According to your state’s laws, you may even have fines or fees for driving uninsured.

It is not only risky to drive uninsured, it’s also expensive!

High Premiums in the Future

A lapse in auto insurance makes you a high risk to insurance companies.

Since insurance rates are based on risk factors, this would mean that you could be paying higher auto insurance premiums in the future.

When you get behind the wheel of a car without insurance, you run the risk of getting into an auto accident with no way to pay for it.

No insurance means that more money comes out of the pockets of insurance companies, thus the high-risk factor.

Think Before You Cancel


While you are never locked into your insurance company, canceling your coverage is serious business.

You should always discuss cancellation policies with your insurance company so that there are no surprises.

You should always think of your options and the consequences before you cancel your insurance policy to make the best possible decision.

Start comparison shopping by entering your zip code below!

Free Car Insurance Comparison

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