How to Cancel a Car Insurance Policy [Step-by-Step Guide 2018]

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Joel Ohman
Founder, CFP®

UPDATED: Aug 3, 2019

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Here's what you need to know...

  • Avoid canceling your policy in a way that leaves you open to risk or negative repercussions
  • There are several ways you can cancel coverage, but the best way to start is to call your current provider
  • You have the right to cancel coverage at any time, but there may be fees or penalties

If you drive, you need car insurance. It provides financial protection that you shouldn’t be without and it’s required by nearly every state, so if you’re caught without it, you’ll be in legal trouble.

You can cancel insurance any time. If you’re considering canceling your car insurance coverage, remember that if you plan to drive, you’re going to need another policy in place.

There are several reasons you may want to cancel coverage, but be careful to do it the right way to avoid a lapse in coverage or harm to your credit.

Here’s what we cover

Compare car insurance quotes using our free tool above! You might find a new insurer that is just right for you.

Be sure to follow the tips below to make sure you cancel insurance in a way that doesn’t leave you at risk.

3 Proven Tips When Canceling Car Insurance

You have the right to cancel your insurance at any time, but make sure you don’t leave yourself with a headache by not thinking things through. Follow these tips for things to avoid.

#1 – Don’t Cancel until You Have New Coverage

If you’re thinking about canceling your current car insurance policy, the most important thing to remember is that if you still need insurance, make sure you have your new coverage in place before the cancelation date of your old coverage.

If there is a gap between coverages, you will have let your coverage lapse. You will have no coverage during the period in between when one policy is canceled and the next begins. Not only is driving without insurance illegal, but it also puts you at a huge financial risk.

If you pick a start date from your new insurer, make sure you make your cancelation date for your old insurer on the same day.

If your plan is to stop carrying insurance altogether, make sure you don’t plan to drive, and if you do, look into a short-term policy.

#2 – Don’t Just Stop Paying and Hope for the Best

There are several reasons why you should avoid payment stoppage alone.

  • If you have set up automatic payments, your payments will just continue.
  • If you stop paying, it could hurt your credit.
  • In the future, you may want to return to the company you stopped paying, but that action will look bad on your record.

If you simply stop paying, your carrier will cancel your coverage as opposed to you being the one who makes the cancelation.

Communication is important, and it’s in your best interest to communicate your intentions with your current insurance company so you can cancel your policy in a way that won’t hurt you in the future.

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#3 – Don’t Cancel Coverage before You Research

If you do a quote comparison, you may find a car insurance company that is significantly cheaper than your current insurer. Before you cancel your current policy, make sure the company you’re considering switching to is reputable.

The price of your premiums is a big deal, but it’s just one component of your policy. Investigate your potential new insurance carrier before you decide to use them for your insurance needs.

Check their financial rating through A.M. Best, an independent company that rates insurers financial standing and outlook. If the company you’re considering has a poor grade, that could indicate an inability to pay claims and probability of going out of business.

Besides looking into the financial health, investigate the customer satisfaction of any company you consider. If customers are generally unhappy, your chance of being unhappy with how they deal with you is higher.

4 Must-Know Options When Canceling Car Insurance

Before you cancel your coverage, you need to find or request your policy so you can read the “conditions” section. The information found here will help you decide how to proceed.

Different insurers have different policies:

  • If your policy charges cancelation fees, you may wish to wait until your renewal date to cancel, especially if that date is close.
  • Some policies will offer a full refund for the premium paid and not used. For example, if there are 30 days in the month, and you cancel on the 15th, they will refund you 50 percent of your premium.
  • Some policies will refund your unused premium minus a percentage. If you cancel halfway through the month, they will refund 10 percent less than 50 percent of your premium. In cases like that, you may want to wait until the end of the coverage period, especially if you pay monthly and you don’t have to wait long.

Once you’ve decided when the best time to cancel your policy is, then you need to schedule the stop date for that time.

#1 – Call Your Insurer

Calling your insurance company is your best option for how to proceed. In fact, most major insurers’, like Progressive’s, and State Farm’s, websites instruct clients to call if they want to cancel.

Likely, they will send you a form or instruct you to request cancelation in writing.

When you talk to an agent, they will probably offer to re-evaluate your policy and check for additional discounts

#2 – Visit Your Agent

Similar to calling your agent, visiting your agent will usually include an offer to review your policy and look for ways to save money on your premium.

The benefit of visiting your agent is that you will likely be able to accomplish your goal of canceling in one setting.

You will likely be able to sign the paperwork necessary to cancel your policy right there in the office.

#3 – Fill out a Form from the Company You’re Switching To

Sometimes, the company that you’re switching your coverage to will offer a cancelation form that you can mail to your current provider. Your current insurance provider may offer their own cancelation form online

#4 – Send a Form Letter

There are several websites where you can download form letters for canceling car insurance. If you’d rather not contact your current insurer, this option allows you to cancel without personal contact.

This method is not recommended as without personal contact, you may miss a key step in a company’s cancellation process.

4 Scenarios for Canceling Car Insurance

How you go about canceling coverage depends on when you purchased it.

#1 – When You Purchase Coverage and Immediately Decide It Was the Wrong Choice

You are certainly able to cancel coverage at any time, but purchasing and canceling in quick succession should be avoided. You’ll get no benefit, and likely you’ll face penalty fees. Before you purchase coverage, make sure that’s what you want to do.

#2 – When You Sell a Vehicle

How you sell a vehicle will determine what steps you should take to cancel insurance on that vehicle.

  • If you are trading a vehicle in for another vehicle, simply call your insurer and let them direct your steps to make sure your coverage transfer is seamless. If you trade a car in and buy over the weekend, normally, your current policy will cover your new vehicle for a few days.
  • If you are selling a vehicle independently, immediately upon completion of the sale, call your insurer and tell them you want to cancel coverage on that vehicle because you no longer own it. You may need to fill out a release of liability form when with your bill of sale

It’s important to remember that as long as the vehicle is titled in your name, you need to carry insurance on it. Once the title has been transferred, you are safe to cancel coverage.

#3 – When You Decide to Switch Carriers

As was mentioned earlier, be very careful with your cancelation date. Make sure your new insurance will be in force on the day you cancel your previous insurance.

The best way to proceed with canceling one carrier and switching to another is to call your current carrier and let them know you want to cancel. They can then instruct you on how to proceed.

#4 – When You Decide You No Longer Need Auto Insurance

Make sure you really don’t need coverage. Will you no longer have a vehicle registered in your name?

If you will no longer own a vehicle and have your transportation needs figured out in a way that doesn’t require you to drive, you don’t need insurance anymore.

You can handle canceling coverage, for this reason, the same way you would if you were switching providers. Call your insurance company and let them know you’re canceling coverage and they can inform you of the information or paperwork they need to cancel your policy.

Canceling car insurance is a simple process. Doing it right isn’t difficult. You just need to think through your circumstances and protect yourself from situations like a lapse in coverage.

Have you done a car insurance quote comparison recently?

Before you make any decisions about canceling coverage, use our free tool below to compare premiums and policies and see how much money you could save by canceling your current coverage and switching to a new provider.

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