Can I cancel car insurance at any time?

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Joel Ohman
Founder, CFP®

UPDATED: Jul 16, 2017

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Here's what you need to know...

  • It is common for policyholders to wait until they receive their renewal invoice to decide whether or not they really would like to renew
  •  Your insurance form must be licensed by the state Department of Insurance to do business in the state where your vehicle is registered
  • You will need to take time to learn about an insurer’s early termination policies and procedures before you buy

When you are approaching your car insurance renewal, you are free to start shopping for coverage to find the best deals.

It is actually most common for policyholders to wait until they receive their renewal invoice and documentation to decide whether or not they really would like to shop the market for better premiums.

About 30 to 45 days before a term expires, the insurance company will begin to underwrite your policy and determine your new rates. This is why the new declarations will be sent for your review.

Typically, you have plenty of time to compare rates before you commit to continuing your policy for another 6 months or another year.

Start comparing car insurance rates now by using our FREE tool below!

What are the rules surrounding a voluntary cancellation?


As a driver, you are obligated to purchase insurance and maintain continuous cover, but the state will not tell you who you must buy your insurance from.

The only real stipulation you must comply with is that the carrier you purchase your insurance from must be licensed by the state Department of Insurance to do business in the state where your vehicle is registered.

While it is allowed, canceling mid-term can create unexpected complications.

The rules surrounding cancellations apply differently to carriers and policyholders. As a policyholder, you are allowed to cancel your insurance at any time.

If you were to look at your declaration’s page, you will find a policy period or term. This is how long your current policy provides you with coverage and also how long your rates are locked in.

If you have paid in full, this is also how long that you will have coverage before you will be billed again.

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Are there penalties for mid-term cancellations?

Even though there is a policy period, you technically can cancel at any time but may be required to pay a penalty. In some situations, penalties for early terminations may be waived because you no longer how a need for insurance.

You will need to take the time to learn about an insurers early termination policies and procedures to decide if they are fair and just.

Learning about the penalties an insurer charges before you switch the company can actually make you think again.

Here are the two different types of cancellation that are used in the insurance industry:

Pro-rated Cancellations

A pro-rated cancellation is the best option for the policyholder because the company will calculated the unearned premium and then return any refund to you without subtracting any type of fee or penalty.

Some states do require that their insurers return all unearned premiums to their clients, but others will allow fees to be charged.

Even in states where fees or penalties are allowed, there are insurers dedicated to pro-rating refunds in an effort to keep their customers satisfied.

Short-rated Cancellations

When an insurer offers a short-rate refund for terminating your policy before the renewal date, you are entitled to only a portion of your unearned premiums.

How the fees or penalties are charged will depend upon the policies in the state and the policies of the company.

The company may charge you a flat fee for canceling or a percentage of the unused premiums. If the policy is near the end of its term, it is possible that the penalty will be waived.

What to Consider Before an Early Termination


You should set aside some time to review your state’s rules regarding voluntary cancellation and cancellation fees.

Companies are not legally allowed to cancel their policyholder’s insurance for just any reason, so some state officials have decided that penalties are justified since the company has projected that they will earn all of the premium quoted.

Other states frown upon the idea of charging customers a fee to cancel something they are already being mandated to carry.

This is why you should review the rules with the Department of Insurance and by reviewing a policy booklet.

Scenarios Where Fees May Be Waived

Sometimes, companies will be willing to cancel your insurance without charging a fee when you no longer have a need for coverage.

If you have surrendered your driving privilege, sold your car and will not replace it, are moving out of state, are being deployed overseas, or the named insured has passed away, any reputable company will consider waiving the fees.

This is something that you should discuss directly with a company representative before you submit your request.

Just be aware that you will not be able to request a fee waiver if you are transferring to another carrier by choice.

Most Convenient Way to Switch Insurers


Canceling your insurance does not have to be a difficult task. It is much more involved when you decide to cancel mid-term because you must deal with both a new carrier and with your current carrier to complete your transaction.

If you are really unhappy with the company that you have and you do not want to wait months for your renewal, it is possible to switch without all of the hassle.

Here is the most convenient way that you can go about changing carriers even though your renewal is not up:

— Step 1: Review Your Declarations Page

Your declaration’s page shows you all of the details about your current policy. Review this form to look for coverage limits and gaps.

This will help you as you comparison shop and may even help you identify vulnerabilities.

— Step 2: Compare Rates with Competitors

Shopping around is the most effective way to save money. When you are shopping around, you should match the same coverage limits and options so that you can get an accurate picture of which insurer has low rates.

— Step 3: Make the Switch

Fill out the application, select an effective date and start your coverage.

— Step 4: Cancel Your Policy

Some carriers will cancel your other policy for you.  If this is not an option, be sure to submit your request as soon as possible.

The best way to comparison shop is to shop online.

Use an online rating tool that gives you instant quotes that you can review and compare from your own home.

Start comparing car insurance rates now by entering your zip code in our FREE tool below!

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