Do You Get a Refund for Unused Premiums After You Cancel Your Car Insurance?

Last Updated on December 12, 2025

You can cancel your car insurance policy—but what happens to the money you already paid? Do you get a refund for the unused portion of your premium, or does the insurer keep it?

In most cases, you’ll get a refund for any “unearned” premium after you cancel car insurance (the part of your premium that covers days you won’t be insured). Some insurers also charge cancellation fees or keep certain policy fees, so the amount you get back can vary.

Below is how car insurance refunds typically work, what can reduce your refund, and what to do if your insurer hasn’t paid you back.

Key Takeaways

• When you cancel car insurance after paying ahead, you usually get back the “unearned premium” for the days you won’t be covered.
• Refunds are typically pro-rated by date, but cancellation fees, short-rate penalties, and non-refundable policy fees can reduce what you receive.
• If you pay month-to-month, you may get a small refund—or you may owe a final balance—depending on billing timing and fees.
• If your refund doesn’t arrive within a few weeks, request a written refund breakdown and escalate to your state’s Department of Insurance if needed.

Yes, You Usually Get a Refund for Unused Premium

Generally, state laws and insurance contracts allow you to cancel your auto insurance policy at any time (as long as you follow the insurer’s cancellation process). If you’ve paid ahead, you’ll usually receive a refund for the unused portion after the cancellation effective date.

However, the refund isn’t always “every penny back.” Depending on your insurer, state, and policy terms, your refund may be reduced by things like:

• Cancellation fees or short-rate penalties (some companies charge a flat fee or keep a small percentage)
• Fully earned fees (certain policy fees may be non-refundable)
• Any past-due balance (if you owe money, it may be deducted from your refund)
• Minimum earned premium (some policies require you to pay a minimum amount even if you cancel early)

If you’ve canceled auto insurance and believe you’re owed money, don’t assume the refund is automatic—follow up and ask for the refund calculation and the cancellation confirmation (effective date matters).

How Car Insurance Refunds Are Calculated

Most refunds are based on “unearned premium,” meaning the portion of your premium for the days you won’t be covered after cancellation.

Example: Your premium is $300 per month and you paid for April on April 1. If your cancellation effective date is April 10, you used 10 days of coverage but paid for the full month. Your refund is typically based on the unused days (about 20 days), minus any applicable fees.

This same idea applies to 6-month or 12-month policies. If you paid your policy in full upfront, the refund is usually larger because more premium is “unearned.” If you pay month-to-month, you may receive a small refund—or no refund at all—depending on billing timing and whether any balance is due.

Do All Insurance Companies Issue Refunds?

Most insurers issue refunds when there’s unearned premium after cancellation. But the details come down to your contract and your state’s rules.

Also, refunds can look different depending on how you paid:

• Paid in full (6 or 12 months): You’ll usually have unearned premium coming back if you cancel early.
• Monthly payments: You might be paid up-to-date (and get a small refund) or you might owe a final amount (especially if fees apply or you canceled after a billing cycle started).
• Finance company / payment plan: If you used premium financing, the refund may go to the finance company first, then to you after the balance is settled.

If you’re choosing between term lengths, keep this in mind: a 6-month vs. 12-month policy can affect how much you’ve prepaid at any given time—and how big a refund might be if you cancel.

And yes, insurers can still remain profitable while issuing refunds—this is part of how the business works (more here: how car insurance companies make money).

How Long Does a Car Insurance Refund Take?

Refund timing varies by insurer and state. Many companies issue refunds within 7 to 30 days, and some process them even faster (especially if you paid by credit/debit card and they can issue an electronic credit).

If you don’t see the refund within a month, ask your insurer for:

• Your cancellation confirmation (with the effective date)
• The refund breakdown (earned premium, unearned premium, fees withheld)
• The refund delivery method (check mailed vs. card credit)

Canceling Soon After You Buy a Policy

Some drivers cancel shortly after buying a policy—maybe they found a better rate or made a mistake on the application. You can still cancel, but the refund amount may depend on policy terms (like minimum earned premium) and whether any fees are fully earned.

Some insurers may also require extra steps to cancel, such as a signed form or a letter. If you’re switching, make sure your new policy starts before the old one ends so you don’t accidentally create a lapse.

My Insurer Hasn’t Paid My Refund: What Next?

If your insurance company hasn’t sent your refund, take these steps:

1) Call your insurer: Start with customer service or billing. Confirm the cancellation effective date, ask whether a fee was withheld, and request the refund timeline and delivery method. Sometimes refunds are delayed due to processing, address issues, or account balances.

2) Send a certified letter: If you’re getting nowhere, consider sending a certified letter demanding payment and requesting a written refund breakdown.

3) Contact your state’s Department of Insurance: Every state has a regulator that oversees insurers. If your company is dragging its feet or you suspect bad faith billing practices, your state DOI can help push the issue forward.

4) File a complaint: You can file a complaint with your state, and you can also document the issue with groups like the NAIC and consumer review platforms.

Some Insurers Charge Cancellation Fees (and It Can Reduce Your Refund)

Some insurers charge an early termination fee or cancellation fee. This might be a flat amount (often $20 to $50) or a “short-rate” penalty where the insurer keeps a percentage of the unearned premium.

If a fee applies, your insurer may deduct it from your refund. In some cases, if there’s no refund due (or you owe a balance), you could receive a bill. If you don’t pay, the insurer may pursue collections (learn more: can an insurer send you to collections?).

Cancellation Fees by Insurance Company:

• AAA
• Allstate
• American Family
• Erie Insurance
• Farmers
• GEICO
• Liberty Mutual
• Mercury Insurance
• MetLife
• Nationwide
• Progressive
• State Farm
• The General
• Travelers
• USAA

How to Check If Your Policy Has Cancellation Fees

Not sure if your insurer charges cancellation fees? The fastest option is to call billing and ask what your refund would be if you cancel on a specific date.

You can also check your policy documents. Most policies include a cancellation section explaining whether refunds are pro-rated or short-rated, whether any fees are fully earned, and how cancellation requests must be submitted.

FAQs on Car Insurance Refunds After Cancellation

Final Word on Refunds for Unused Premiums

Yes—if you cancel car insurance after paying ahead, you’ll typically receive a refund for unused (unearned) premium. The exact amount depends on your cancellation date, your policy terms, and whether any fees apply.

To keep it simple: set the cancellation effective date, confirm it in writing, ask for a refund breakdown, and follow up if you don’t see your refund within a few weeks.