Can I get a refund for car insurance premiums that are not used?

Getting a refund on unused premiums is usually automatic if you cancel your policy. If that doesn't happen all you need to do is contact the company and request your refund.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jun 6, 2020

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Here's what you need to know...

  • In most cases, when you switch insurance providers, you will be issued a refund in a short amount of time
  • If you’re not issued a refund, there are some steps you can take to change that
  • Some insurance companies require early termination fees, which may negate your refund

Do you get a refund if you cancel insurance? Getting a refund for unused car insurance premiums is easy; that is because most insurance companies will automatically pay you your balance once you cancel your policy. If that doesn’t happen, then all you need to do is contact the company and request your refund.

You can get FREE online car insurance quotes by entering your ZIP code now!

If you have been driving for a while, you probably already know that you are legally able to change car insurance companies at any time for any reason.

With that being said, most insurance companies do require a deposit before you start your policy, and they have you pay at the beginning of each month for the following month’s coverage.

The money you pay is broken up into a daily. If you pay $89 a month for example, then the daily value for your insurance would be $2.93. If you cancel on the third day of a 31 day month then the insurance company owes you $80.33.

This same breakdown applies whether you make monthly payments or you are one of those people who pay all 6 months in advance so that you can get a discount in your policy.

Just ensure that you keep track of where you are in your policy so that you know just how much the insurance company owes you.

Are insurance companies required to issue a refund?


While we are not aware of any states that specifically mandate refunds for canceled policies, many states reserve the right to force insurance companies to issue refunds if it is determined they are warranted.

Texas is a good example. In that state, the Texas Department of Insurance can require refunds if an insurance company’s filed rates are deemed to be excessive or policies are canceled within a specified window of time.

The reason state law is so open-ended in the area of refunds is due to the fact that insurance is, by its very nature, open-ended itself. Insurance companies make their profit by investing customer premiums in various forms of securities.

Therefore, if a driver cancels his policy before the end of his term, his decision will directly influence the insurance company’s investments. It is a fine line insurance providers must walk between keeping customers happy and trying to be profitable.

The good news here is that insurance companies usually will not argue about issuing a refund if cancellation is made within a certain time frame.

For example, canceling a six-month policy with three months remaining will mean you’ll get a refund in most cases.

On the other hand, canceling that same policy during the fifth month will probably result in you getting little to no refund. You’ll have to check with your individual insurance carrier to find out what their stated refund policies are.

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How quickly should I get a refund from my insurance company?

How long does it take for a refund from car insurance? Each state has its own rules and regulations that the insurance company has to follow when someone cancels their insurance policy. In most cases, the insurance company must pay you the balance on your account within 30 days of you closing your account.

The good news is that most insurance companies are much faster than this. What’s more, there are many companies that will automatically place the money into your checking account rather than send you a paper check.

This typically only occurs if you are paying via direct pay.

If you want to know when to expect your refund you can call the insurance company directly and ask what their typical time frame is.

They may tell you that it will be within 30 days or whatever the state maximum is, but most companies will also tell you what the typical time frame is as well.

My insurance company hasn’t sent me my refund, what can I do about it?


While insurance companies aren’t the big bad wolves that some lawyers make them out to be, that reputation exists for a reason. Sometimes insurance companies hold back, don’t return phone calls and don’t pay out your reimbursement check.

Here are some steps to take:

  1. Call – If this has happened to you, the first step is to call the insurance company and find out what the problem is. There is a chance that your final payment didn’t clear or you used more days than you initially realized.
  2. Certified mail – If you don’t get any results from your phone calls, then you need to draft a certified letter to send to the company demanding payment.
  3. Contact Department of Insurance – The reason this needs to be certified is because the next step is to contact your state’s Department of Insurance to file a complaint.
  4. Complain – In addition, take the time to file a complaint with the Better Business Bureau as well.

If you paid a lot of money up front, then you may have to take steps to take the insurance company to small claims court.

This step, unfortunately, costs money so you may not want to do this for a $50 refund. However, if you do, then the insurance company will be responsible for the court fees in the end if they lose the case.

The insurance company says I owe them money, what do I do?


In some cases, you will discover that the insurance company charges fees for an early cancellation of your car insurance. If this is the case, they will first use your existing money to pay for those fees and then send you a bill for whatever is remaining.

It is vital that you read the small print for any insurance contract to ensure that you don’t have to pay any fees if you cancel your account early.

It is perfectly legal for an insurance company to charge you early termination fees.

Only a handful of insurance companies do this to discourage cancellation due to a couple of dollars of savings each month. Some fees are as low as $20 but some companies charge equal to one month’s premium, or even more.

The bottom line is that if this happens to you, you are going to have to pay, just like they would have to pay you if you owe any money.

Their recourse isn’t going to be small claims court, instead, they are going to report your non-payment to the credit reporting companies and your credit score will be affected, so keep that in mind.

If you are considering changing your car insurance and breaking your current contract, make sure it’s worth it by getting the lowest rates possible. You can do this now by entering your ZIP code and getting free online car insurance quotes today!

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