Most people don’t question the need for carrying car insurance. After all, the law requires automobile owners to purchase minimum amounts of liability coverage, and some states require uninsured and underinsured motorist insurance. However, there are situations in which it makes sense to cancel some or all your auto coverage. But when is the best time to cancel a policy and how do you go about it?
When you should cancel your car insurance
Canceling an insurance policy might seem like a good idea under certain circumstances. But canceling insurance comes with risks, so it’s best to know when it makes financial sense. Here are some circumstances when you should send in your cancellation notice:
- If you move to another state where your current insurance company does not offer coverage, you’ll need to get a policy from an in-state provider. Arrange for the new policy a few weeks in advance to avoid a lapse in coverage.
- When you sell a car, with no plans to replace it, you can cancel your auto insurance. Never discontinue coverage until the new owner takes possession.
- If you know nobody in your household will drive a vehicle for an extended period, you may consider canceling its insurance coverage. Some parents drop insurance on their kids’ vehicles when the kids go off to college without taking their cars. Before you drop coverage, check with your state’s insurance department to find out if it’s lawful for your parked or stored car to go uninsured. If you’re still making payments on the car, find out what coverages the lender will allow you to cancel.
- You may decide to switch your insurance provider to get a better rate. Always switch to a new policy before dropping your current coverage. The end of a policy term is the best time to switch insurers. Start shopping for a new insurance company five or six weeks before the end of the policy term, so you’ll have ample time to secure new coverage.
- If you have an older car you own outright, you might want to drop collision and comprehensive coverages. Consider the risks before dropping any coverage. If you discontinue collision and comprehensive, you’ll have to foot the bill if your car is damaged or stolen.
If you’re considering canceling your car insurance, be strategic about when you cancel and when it makes sense to do so. Your prior insurance history is a factor insurance companies use to set your premium rate, so a gap in coverage, even for a few days, may lead to higher premiums when you decide to drive again. The longer the gap in coverage, the more it may affect your car insurance rates in the future. Calculate whether it will save you money in the long run to temporarily cancel coverage for one of these reasons.
When you should not cancel your car insurance
It’s sometimes easy to jump the gun and cancel a policy that you don’t think you need. But dropping coverage can lead to unexpected consequences. You can often meet your objective without dropping your coverage. Here are times when you should not cancel your policy.
- Never cancel your auto insurance policy when you plan to continue driving. It’s likely illegal and puts you and others at risk.
- Moving does not automatically require you to get a new auto policy. Before moving, contact your current company 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 choose a new agent.
- Don’t cancel your car insurance when you get married or divorced. You can add a new spouse to your current auto policy and sometimes earn a discount for tying the knot. You may 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 remove your ex’s name from your current policy.
- Never cancel your car insurance due to a temporary non-driving period. Some insurance companies allow you to suspend your coverage if you put your car in storage for 30 days or longer. That can come in handy if you go on an extended vacation or need time to recuperate from surgery. However, if you’re still making car payments, you must get approval from the lender to suspend coverage. The suspension process can vary by state. In some states, you can call your agent to make the request, but you’ll need to send a written request in others. If you cancel your policy instead of suspending it, you could incur a rate increase when you purchase a new policy due to a lapse in coverage.
- Don’t cancel your car insurance due to a high premium rate. Most insurance companies offer several types of discounts. You may qualify for a discount for driving safely, taking a driving course or reporting your car’s safety features, such as airbags or antilock brakes. Contact your agent to find out how discounts can lower your rate.
How to cancel your car insurance
- If you plan to continue driving your automobile, purchase a new policy before you request cancellation of your existing coverage.
- Check your insurance company’s website to learn about its cancellation process.
- Many companies, including Esurance and Geico, allow you to cancel your policy over the phone. Allstate recommends calling your local agent. Some insurance companies or agents may ask you to send a written cancellation request.
- When calling to cancel your insurance, have the new policy number handy. In some states, an agent will ask for your new policy number to notify the state that you have continued coverage.
- Ask the agent or representative if the company will charge you a cancellation fee.
- Confirm the cancellation date with the agent or representative.
- If you cancel before the end of the policy term, ask the agent or representative when you will receive a refund.
Can I get a refund if I cancel my car insurance?
Your insurance company may charge a cancellation fee if you cancel before the end of the policy term. If you have paid your premium in advance and cancel before the end of the term, the insurance company must refund the balance in most cases.
The insurance industry is highly regulated, and each state has insurance statutes that govern how companies must handle refunds. In Nebraska, for example, the insurance company must contact you within 15 business days of cancellation to inform you about any eligible refunds. 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, insurance companies do not have the obligation to refund your money within a given time period. Many insurance contracts state that the company will issue a refund “within a reasonable time.” To avoid refund headaches, it’s best to give your cancellation notice when it’s time to renew.
Frequently asked questions
How do I cancel my car insurance anytime?
Cancellation policies vary from company to company. Some insurance companies allow you to cancel your policy over the phone, while others require you to put the request in writing. Ask your company about what cancel policy will apply to you.
Should I cancel my car insurance if I go on an extended vacation?
No. Instead, ask your insurance agent if you can suspend coverage while you’re away. Suspending your coverage will help you avoid paying for unused coverage but will not cause a gap in your insurance history.
Do I need to cancel my policy if I move to another state?
Not necessarily. Many major insurance providers operate in all U.S. states. Ask your insurance agent if the company operates in the state where you plan to move.
Can I cancel some coverages without canceling the entire auto policy?
Yes. Many people choose to drop expensive coverages such as comprehensive and collision after they pay off their car. You can drop non-essential coverages and keep required liability policies.
Do I need to do something specific to cancel if my car insurance company drops my coverage?
If your insurance company dropped you, they cancelled the policy themselves. You don’t need to cancel with your original provider, but you’ll need to find a new car insurance provider.