Key takeaways

  • You should have another policy in effect before canceling your existing coverage to avoid your future car insurance premiums increasing substantially due to a lapse in coverage.
  • If you are recuperating from surgery or embarking on a long vacation, you may want to suspend your car insurance instead of canceling.
  • When you move to a new state, it helps to contact your insurance provider immediately to ensure that your policy aligns with the car insurance laws in your new location.

You may need to cancel your car insurance policy for several reasons. While it can be a fairly straightforward process, some common mistakes can leave drivers in an unfortunate situation. Having an unintentional lapse in car insurance coverage can increase your future rates and possibly result in fines from your state’s Department of Motor Vehicles (DMV). Bankrate’s insurance editorial team created this guide to help you cancel your car insurance the right way and determine when it is and is not appropriate to do so.

How to cancel your car insurance

It’s relatively simple to cancel your car insurance. However, not all car insurance companies have the same cancellation process. Additionally, each state has rules about whether a driver can cancel their car insurance before or after surrendering their license plates. Before canceling your car insurance, check with your insurance agent and DMV to ensure you comply with your state’s insurance laws. Below, you’ll find a list of best practices from Bankrate’s insurance editorial team, which includes licensed agents, to make the process as seamless as possible.

  1. Purchase a new policy before canceling: Securing a new auto insurance policy before canceling your existing policy will protect you from experiencing a lapse in coverage. A lapse in coverage could cause your insurance rates to increase since driving without insurance is illegal in most states.
  2. Contact your insurance provider: To cancel your existing insurance policy, you may call your insurer, contact an agent through the company’s mobile app or website, mail in a cancellation request or speak to an agent in person, depending on your carrier’s options.
  3. Ask to speak with an agent about cancellation: Each provider will likely have different requirements for canceling a policy. For example, some providers may require you to pay a cancellation fee or give a 30-day notice ahead of your cancellation date. It might be beneficial to speak directly with an agent to be clear on what steps are required.
  4. You may be required to sign a cancellation letter: Cancellation letters are not as common as they once were due to the convenience of email and online forms; however, some auto insurers may still ask that you send a letter requesting your coverage to end. The letter typically includes your policy number, your name and the date you want your policy canceled. If you paid for your policy up front and have remaining months of coverage, you may also choose to include a refund request for the unused portion of your policy.
  5. Request a policy cancellation notice from your auto insurer: Once finalized, carriers will generally send a notice confirming that your policy has officially been canceled. If you do not receive a notice, you may ask that your insurer provide one to ensure you have a written record of the transaction.

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When you should cancel your car insurance

You may need to cancel your car insurance for various reasons, but it is important to consider your plan for being without coverage beforehand. For drivers making a carrier switch, purchasing a new policy ahead of your current policy’s expiration is a good practice. If you are making a permanent cancellation, consider talking through your situation with an insurance agent to make sure that missing coverage will not put you at legal or financial risk.

When you move

If you move to another state where your current insurance company does not offer coverage, you will need to get a policy from an auto insurer that offers coverage in your area. Arrange for the new policy a few weeks prior to ending your current policy to avoid a lapse in coverage. Some states, like New York, require drivers to surrender their license plates before canceling car insurance, even if it is for an out-of-state move. In these situations, you may need to have a few days of overlapping insurance to avoid state fines.

When you do not have a car

When you sell a vehicle with no plans to replace it, you can cancel your auto insurance. However, it is usually a good idea to hold off on discontinuing coverage until the new owner takes possession and the title is transferred to them. Check with your local DMV to see if you are responsible for turning in your license plates or if they stay with the new owner. If you plan on getting a new car within a few months of selling your old one, you may want to speak with an agent about converting your policy to a non-owner policy. This may help you avoid an insurance lapse, maintain the policy discounts you earned with the company over time and avoid a possible rate increase.

When you want a better deal

You may decide to switch your auto insurance provider to get a better rate. Again, it is usually a good idea to secure a new policy before dropping your current coverage. You can usually switch insurance companies at any time, but closer to the end of the policy term may be better for policyholders obligated to pay a cancellation fee. Having the start date of your new policy match the intended cancellation date of the old policy is the best way to ensure there will be no lapse in coverage. Experts recommend shopping for a new insurance company at least six to eight weeks before your coverage is set to expire.

When you want to reduce coverage

If you have an older vehicle you own outright, you might consider dropping optional collision and comprehensive coverage. Consider the risks beforehand, though. It is important to note that if you discontinue collision and comprehensive, you will likely have to pay out of pocket if your car is damaged or stolen, so you need to be prepared financially. This would be considered a policy amendment, not a policy cancellation.

When you should not cancel your car insurance

While you can cancel your auto insurance anytime, you may not always need to. Before canceling your coverage, it might help to think through why you no longer need insurance and create a strategic approach to prevent potential legal or premium-related issues.

When you will be driving

Canceling coverage on a vehicle you still plan to drive is not the best idea, as it could put you at financial risk and potentially violate state laws. Speak with a licensed insurance agent to learn more about how driving your vehicle without insurance could affect you.

When you move

Moving does not automatically require you to get a new auto policy. Before moving, contact your current auto insurer to find out if you can transfer your coverage to the new state. Moving can cause your rate to change because location is a factor in determining premiums. If your current insurance company operates local agencies, you might need to work with a new agent, as well.

When you get married or divorced

While getting married or divorced usually indicates that a policy review and changes are needed, it doesn’t mean you need to cancel your insurance with your current carrier. You can add a new spouse to your current auto policy and may even earn a discount for tying the knot. You could potentially also qualify for a multi-policy discount if you and your new spouse have insurance with the same company. If you get divorced, you can typically remove your ex-spouse’s name from your current policy instead of canceling the policy altogether.

When you are only temporarily not driving

If you plan on taking a break from driving for an extended period, some car insurance companies will allow you to suspend your car insurance and put your vehicle on a storage plan. However, make sure to check with your insurance carrier to ensure you’re compliant with your state’s requirements. In some places, you will have to send a written request for suspension or cancel your license plates, while in other states you can simply call your agent. If you cancel your insurance policy instead of suspending it, your insurance company will likely view this break as a lapse in coverage and your insurance premium may increase when you purchase a new policy.

When your premium is high

A high premium does not necessarily mean you need to cancel your coverage. Most auto insurers offer several types of discounts. You may qualify for a discount for driving safely, taking a virtual driving course or reporting your car’s safety features, such as airbags or anti-lock brakes. Contact your agent to find out how discounts can lower your rate and which ones you may be eligible for that you aren’t currently taking advantage of.

If I cancel my auto insurance, will I get a refund?

If you paid your premium in advance and cancel your policy before the end of the term, the insurance company might refund the remaining balance. Most auto insurers will prorate your refund based on the number of days your current policy was in effect.

The insurance industry is highly regulated, and each state has insurance statutes that govern how companies must handle refunds. In Nebraska, for example, an auto insurer must contact you within 15 business days of cancellation to inform you about any eligible refunds. In many states, like Texas, if you finance your premium through a premium finance company, the insurance company may return the unused premium to the finance company, not you.

Unless otherwise stated in a statute, auto insurance companies usually do not have the obligation to refund your money within a given time period. Most insurance contracts typically state that the company will issue a refund within a reasonable timeframe. To avoid refund headaches, it is best to notify your auto insurer of your plans to cancel when it is almost time to renew. Check with your carrier before canceling to learn more about its insurance cancellation policy.

Car insurance cancellation fees

Depending on the auto insurance company, canceling your policy before the end of its term may result in a cancellation fee. State laws can determine if a fee is allowable. If so, it is up to the insurer to set that fee, which is often taken out of the prorated refund.

Cancellation fees can be a flat fee or a short-rate fee. With short-rate cancellations, the insurer will charge the policyholder a percentage of the unearned premium — usually 10 percent. This amount will be taken from the remaining refund, or the policyholder will receive a bill if there isn’t a refund owed. Knowing whether your state makes fees permissible could help you prepare for any cancellation fees in advance.

What happens if you stop paying your premiums without canceling your car insurance policy?

If you want to discontinue your coverage, it is best to contact your insurer or your agent. If you stop paying your premiums but do not cancel your policy, your carrier will eventually cancel your policy for nonpayment. However, there may be charges for insurance coverage up until that point, along with possible late fees.

Failing to properly notify your insurer that you want to cancel may even impact your experience of finding auto coverage in the future. Even if you intend on finding a new car insurance company, missing payments entirely could lead to poor payment history and make securing affordable rates more difficult. Similarly, if you have automatic bank account withdrawal enabled to pay your premiums, you may continue to pay for coverage that you do not intend to keep.

Notifying your insurance company of your intent to cancel, along with providing a specific cancellation date, allows the insurer to follow the appropriate cancellation procedures — such as notifying the DMV of the cancellation on your behalf and starting any refund process.

Frequently asked questions

    • Because gaps in coverage may negatively impact your future premium, foregoing auto insurance — even for an extended vacation — likely is not worth it. If you plan to be away for a month or longer and your vehicle will not be in use, there may be other ways to save on your premiums without canceling your policy. Experts recommend speaking with an agent to learn about your options.
    • When you move, you will need to register your vehicle in your new state of residence and purchase a policy that aligns with the state’s auto insurance laws. Many major insurance providers operate in most U.S. states and Washington, D.C., so you may be able to stay insured under your current carrier even if you need new coverage. If you do need to find a new insurance carrier, shopping for quotes and securing coverage before you move to another state can make the transition easier.
    • Some drivers choose to drop additional coverage types, such as optional comprehensive and collision, after they pay off their vehicles. This may be more suitable for drivers with older vehicles who would pay more in premiums than it would cost to fix their damaged cars. In cases like this, you may consider dropping non-essential coverage and keeping liability-only policies.
    • Yes, your insurance company can cancel your coverage. If you do not pay your premium on time, lie on your auto application or your driver’s license gets suspended or revoked, your insurer could cancel your policy. If this happens, you can ask your insurer if there are steps you can take to reinstate your policy. If reinstatement isn’t possible, you may shop for a new carrier before the policy cancels to avoid a lapse in coverage, which can cause your rates to increase.