Cancelling Your Auto Insurance Policy

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Here's what you need to know...

  • The company cannot cancel the contract unless they first notify the policyholder
  • Late payments can invalidate a car insurance contract
  • The insurance company has the right to hold you to a contract but there are some circumstances that may allow for a release

There are many valid reasons for car insurance cancellation. First and foremost, the insurance company has the right to cancel a contract if a policyholder defaults on payments, or if there is evidence of tampering or fraud.

Review the circumstances in which both you and your insurer can cancel an auto insurance policy below.

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Why would a company cancel a car insurance policy?


Auto insurance companies reserve the right to cancel your contract if any of the conditions have been violated. However, the company cannot cancel the contract unless they first notify the policyholder.

If there is any situation in which an insurance company might see the need to cancel a policy, they must first send notice to the listed address ten days before cancellation.

The insurance company must give a reason for the cancellation as well as a date of termination. During this time, drivers have the chance to contact the company and resolve the issue.

If no agreement is reached, the policy will be automatically canceled.

What are some of the reasons that may cause a company to forfeit the contract?

Consistently late payments can invalidate a car insurance contract. In addition to fraud, misrepresentation (stretching of the truth or outright lying) can also result in a canceled policy.

The insurance company rightly assumes that insured drivers are giving full information regarding the vehicle and the settings. When they discover misinformation, they usually respond with cancellation.

What if the driver has become increasingly dangerous on the road?


This could result from a major life change (drugs or alcohol) or merely a personality shift, in which the driver makes more unnecessary risks.

If the insurance company reevaluates a driver and finds that he or she is no longer insurable under the present terms, then the company can cancel the policy. Usually, an insurance company will merely raise premiums to reflect the accident claims that have been filed.

However, in rare cases of negligence, an insurance company reserves the right to cancel the policy for a driver that is clearly a danger to himself and others. Also, major traffic violations such as criminal behavior or a DUI/DWI conviction are also grounds for contract cancellation.

Remember also that an insurance company can choose not to renew a policy based on a high number of claims. (Though it’s rare that they cancel a policy mid-year for this reason)

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Can you cancel your auto insurance policy if you choose?

There are many reasons why a policyholder might want to cancel a policy. He or she might find a better deal elsewhere or might be disgruntled with the insurance company because of an unpaid claim.

Perhaps the insured has upgraded his or her vehicle and wanted to work with an insurance company that specializes in that type of vehicle.Perhaps the driver cannot afford the premiums anymore or wants to change a deductible plan.

If the insurance company is uncompromising in your request to change the terms, then canceling the policy may be the only option.

The owner of a policy can choose to simply not renew the policy or can cancel the contract, in hopes of getting a refund on the unused portion of the bill.

Though the insurance company has the right to hold you to a contract, unless there is evidence of misrepresentation on the part of the insurance agent, there are some circumstances that may allow for a release. Each insurance carrier has its own process for contract cancellation.

The insurance company may also have to follow state requirements for policy cancellation. The first step to ending a policy is usually to dial the insurance company’s toll-free number and speak to a customer service representative.

Are there internet tools to help in a car insurance comparison?

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The agent will usually inform insured drivers that they must write a signed letter stating that they want to be released from the contract for coverage.

If there is no evidence of fraud, and if the cancellation is within a reasonable time frame of new service, then the insurance company may choose to offer a refund.

In this event, the motorist will receive a refund in the form of a check for the misapplied premiums.

Bear in mind that the insurance company can and usually does charge a termination fee for a canceled policy.

The termination fee amount is approximately the same price as one month’s worth of premium payment.

Before deciding to cancel an insurance policy, do your homework and find a company that you trust. Do not go long periods of time without a policy in place. You can get help researching insurance companies with a third party car insurance comparison tool.

These tools let you view your options side by side after you have input the same information on a question form. If you do decide to cancel your current policy, or your company has canceled your policy, you will want to know how you will replace that coverage.

Take a few minutes and just enter your zip code into our free car insurance rate quote tool right now!

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