How Do You Cancel Your Auto Insurance Coverage the Right Way?
Last Updated on January 10, 2021
When it comes time to cancel your auto insurance coverage, you want to make sure that you do it the right way to protect yourself legally and to protect your credit. You may need to cancel your car insurance coverage if you change cars, decide to change companies, sell your car and stop driving, or move to another state.
How do you cancel your car insurance the right way? When is the best time to cancel your auto insurance policy? Can you cancel mid-policy? Will there be any cancelation fees? Continue reading below to learn everything you need to know about canceling your auto insurance coverage.
Canceling Your Auto Insurance When Your Policy Ends
You may think that your policy will end, and your coverage will cancel at the end of your term automatically. However, this is generally not the case. Most car insurance companies use auto-renewal. If you don’t notify them that you are not going to renew your policy, it will renew automatically, and you will owe another premium payment. If you are planning to change your car insurance at the end of your term, contact your car insurance company and notify them. Usually, you can do this by phone or online. Sometimes, however, there may be a written form that you have to fill out for notice of non-renewal.
Canceling Your Auto Insurance During Your Policy Term
Most insurance companies allow you to cancel your policy at any time, regardless of how you pay or how long your term may be. Usually, you can cancel your car insurance coverage over the phone or online. Other times you might have to provide written notice of cancelation. You may be supplied with a form, or you may simply need to write a letter. If you work with an agent rather than online or with larger customer service, canceling your policy is much easier.
The good news is you can cancel your policy at any time, even if you have already paid your premium. For example, you may have paid for six months of car insurance, but you need to cancel after three months. When this happens, after your policy is successfully canceled the unused portion of your prepaid premiums will be refunded to you. This is usually done in the form of a check, and it can take several weeks.
Notifying of Cancelation Date
When you notify your car insurance company that you want to cancel your coverage, you will need to tell them on what date you want coverage discontinued. If you do not specify a date, your coverage could be canceled from the minute you contact them. This could leave you unprotected and without insurance.
Even if you have just signed up with car insurance through another company, you may not be immediately covered. Often new car insurance policies do not take effect until midnight of the following day. Sometimes the gap can be even more. Make sure of when your new policy will start, and then have your old car insurance coverage canceled on the day after the new policy takes effect. This ensures that you are not without the needed coverage.
Are There Cancelation Fees for Auto Insurance?
Most auto insurance companies do not have cancelation fees. Even if you want to cancel your auto insurance mid-policy, you probably won’t have to pay any sort of fee or fine.
Some auto insurance companies even have a pro-rated cancelation system where they will refund you any unused premiums you already paid for. GEICO, Progressive, Farmers, State Farm, Allstate, USAA, Liberty Mutual, and Nationwide are just some of the auto insurance companies that use this sort of pro-rated cancelation system.
Other auto insurance companies do not have a cancelation fee per se, but they instead use what is called a short-rated cancelation system. With short-rated systems, they will take the cancelation fee out of your already paid premiums. They will only refund you your unused premiums after the fee has been taken out. Insurers like The General, Esurance, and Mercury use a short-rated system.
Consequences for Not Canceling the Right Way
If you do not cancel your car insurance coverage the right way, it could be detrimental to your credit and your ability to get car insurance in the future. If you cancel your car insurance without having coverage to replace it, that will show when you go to get a new policy. Often if you have any period of time without car insurance, even if it is because you do not own a car, it will affect your future car insurance rates.
If you do not cancel your car insurance the right way and only stop making the premium payment, you could wind up owing the car insurance company money for coverage that continued past the date covered by your last premium. They will then cancel your policy for lack of payment, which shows on your credit report. This can also hurt you when you go to get replacement car insurance in the future, as you could be considered high-risk if you have had your car insurance forcibly canceled by the insurance company.
Legal Requirements for Canceling Your Auto Insurance
You may have some legal requirements when it comes to canceling your car insurance policy, depending on your state’s laws and regulations. Some states require you to show proof that you have gotten new car insurance coverage before you are allowed to cancel your previous policy. You may need to supply this proof to your previous car insurance company before they will formally cancel your policy.
You may also need to report your change in coverage to the state DMV. Some states, such as Massachusetts, require you to have your car insurance information on your registration paperwork. It is your responsibility to maintain this paperwork and keep the records up to date.
Final Word on Canceling Auto Insurance
If you’d like to cancel your auto insurance coverage, the process is quite simple. Calling up your auto insurance company and canceling over the phone is the easiest way of cancelation and most major insurance companies accept this method. Sometimes you can also cancel via the website or mobile phone app. In rarer situations, you will have to send in a written notice of cancelation. Usually, there won’t be any sort of cancelation fee – even if you decide to cancel mid-policy.
To begin the process of canceling your policy, first, make sure that you have a new insurance policy in place (if needed), then call your auto insurance agent to ask about your company’s method of cancelation.