How To Cancel Auto Insurance

You can cancel car insurance at any time, even if you purchased a 12-month policy. If you decide to cancel coverage, make sure to take the proper steps to ensure that you don’t have a gap in coverage.

Reasons you may decide to cancel car insurance include finding cheaper rates with another insurer, moving to a new state or even having an unpleasant experience with your current insurance company.

How to Cancel Your Auto Insurance Policy

You can cancel your car insurance by calling your insurance company or agent. Your insurer may request the cancellation in writing.

When contacting your insurance company or agent, know the date you want the cancellation to be effective. Make sure you receive a cancellation notice to confirm your car insurance is canceled.

Your insurance company will generally send you a pro-rated refund for the remainder of the policy term. There is typically no cancellation fee, but if your insurer has one the amount will be subtracted from the refund.

Here’s what to do when you want to cancel a car insurance policy and change insurers.

Asses Your Car Insurance Coverage

Decide exactly what types of car insurance and limits you want in a policy. You may want to stay with the same coverage levels as your current insurer or make changes.

For instance, if you bought a home and you have more to lose, you may decide to increase the limits on your liability insurance, which helps protect what can be taken from you in a lawsuit. Liability car insurance also pays for damage and injuries you accidentally cause to others.

Or if you recently bought a newer car, you may want to add collision and comprehensive insurance to pay for damage to your vehicle. If you financed your purchase, you’re usually required to buy these optional coverages. Collision pays for damage to your car regardless of who caused the accident, and for damage if you hit an object, like a fence. Comprehensive pays for theft and for non-crash damage, like hail, flooding and collisions with animals.

Once you determine your car insurance coverages, compare car insurance quotes from multiple companies and buy your new policy, noting the effective date the new coverage kicks in.

Related: Average Cost of Auto Insurance

Determine Your Cancellation Date

Once you’ve identified when your new coverage begins, you can zero in on a cancellation date to give to your insurance company. You should have the cancellation date of the old policy be the same day or before your new policy takes effect. That way you’re not left uninsured.

It’s vital that you have coverage in place before the cancellation date of your current coverage. If you cancel your car insurance without getting a new policy, driving without insurance puts you at a higher financial and legal risk. You would be responsible for paying for injuries and damage you cause if you get in an accident.

You can also face fines and jail time for driving without insurance. Most states require drivers to have liability car insurance to drive legally or demand you have the ability to pay for others’ medical bills and property damage if you cause a car accident.

The National Association of Insurance Commissioners estimates the average bodily injury claim is over $20,000 and the average property damage liability claim is about $4,200. That could put a serious dent in your wallet and savings if you cause an accident while driving uninsured.

Cancel Your Old Car Insurance Policy

Once the new policy is all set, contact your old insurance company to verify its cancellation process. You may be asked to put your cancellation request in writing, for their records. You’ll want to understand your insurer’s specific procedure to make sure you correctly terminate the policy.

Request a policy cancellation notice confirming that you canceled your policy. It’s wise to have documentation on hand if you need it.

When to Cancel Car Insurance

You can cancel a policy at any time. Make sure to have your new car insurance in place before canceling. You don’t want any gap in coverage—even if it’s a day.

You may also decide to cancel a policy at the end of your term, so you don’t face a cancellation fee if your policy has one.

Once you have a start date for the new car insurance policy, you can cancel your current policy, but remember to make sure there is an overlap in coverage, so you don’t go uninsured.

What Happens When You Cancel Your Car Insurance?

When you cancel a policy, you may get a car insurance refund or a policy credit if you’re staying with the same company. There could also be a cancellation fee that reduces the refund.

Here’s when you may get a refund:

• You’ve already paid for the policy in advance.
• You’re switching car insurance companies.
• You’re selling your car.
• You’re reducing coverage.

You likely won’t get a refund if:

• You pay monthly.
• The insurance company canceled the policy because of nonpayment, fraud or another reason.

Car Insurance Refunds

There are generally two types of cancellation refunds: pro rata and short-rate cancellations.

• With pro rata cancellations, you’re refunded the full unused portion. For example, if you had a six-month policy for $500 and canceled mid-term, you’d get a $250 refund.
• With short-rate cancellations, the insurance company decides the terms of cancellation and can keep a portion as a penalty.

Under a short-rate cancellation rule, you might get back 90% of a pro-rata refund. That means if the unused portion of the policy would equal $100 in premiums already paid, the short-rate method could result in a $90 refund. Your insurance company might calculate a short rate differently.

In Forbes Advisor’s analysis of companies that use short ratings, we found they tend to be used by non-standard auto insurance companies.

Here are some examples of companies that use short rates for some or all policies for customers who cancel:

• American Modern
• First Acceptance
• Infinity Auto Insurance
• The General 
• National General

Reasons to Cancel Car Insurance

Times when you might want to cancel car insurance and choose another insurance company include:

• You move to a new state. Minimum car insurance requirements vary by state, so you typically should buy a new policy to comply with the state’s laws.
• You move within the same state. Moving within a state doesn’t require a change, but insurance companies partially set rates based on where you live. You may want to switch insurers if you find a better rate with another insurer.
• You find a car insurance company with better rates. Car insurance companies don’t weigh risk the same, so you may find an insurance company that charges much lower rates for you than another. That’s a good time to switch insurance companies, but make sure you take the right steps to avoid being uninsured.
• You want to change coverage, such as dropping comprehensive coverage or increasing your liability coverage.
• You change vehicles and find better car insurance rates for that vehicle elsewhere.

Keep in mind that canceling auto insurance without having new insurance in place will cause an insurance gap on your record. In many cases, an insurance gap will lead to higher rates when you buy coverage in the future, even if your reason for canceling is that you no longer have a vehicle.

If you have a vehicle and want to stop coverage, you may be able to temporarily suspend insurance. This option is generally reserved for snowbirds and people who are leaving on military deployment, or similar situations where a car will not be in use for an extended period.

Consequences of Cancellation Because of Non-Payment

If you intend to cancel your current insurance policy altogether, don’t just stop paying it. After the grace period for payment, an insurer could send you a cancellation notice.

Consequences can include:

• Driving uninsured. If your policy has been canceled and you keep driving, you’ll have to pay for any auto accidents. If you’re sued for an accident, it could break you financially. You can also face fines and jail time if you’re caught driving uninsured.
• Suspending driver’s license. Because most states require drivers to have auto insurance, you could have your license suspended for driving uninsured.
• Higher car insurance rates. Having a cancellation for non-payment on your record will likely lead to higher rates when you buy a new policy.
• Repossession of the vehicle. If you have an auto loan or lease, you’re likely required to keep auto insurance on the vehicle at all times. If you violate the loan or lease agreement, the lender could repossess the vehicle.

Properly canceling auto insurance when you buy a new policy isn’t hard. Auto insurance companies are adept at helping customers make the transition to a new policy and can coordinate the switch.

How to Cancel Car Insurance FAQ