Can I Cancel My Auto Insurance at Any Time?

There are various reasons you might want to cancel your auto insurance policy. Maybe you switched to a new provider, moved to a different state, or sold your car. Whatever the case, you’re probably wondering what happens when you cancel your existing policy. We’ll dive into canceling and how to avoid fees, penalties, and other headaches.

Refunds, Fees, and Penalties

If you paid any premiums in advance, your provider should refund them to you.¹ For example, if you paid for a six month policy and canceled after two months, you should receive four months’ worth of premiums. Or, if you pay monthly and cancel halfway through the month, you should receive half of your premiums back. However, cancellation fees may eat into this money. You’re especially likely to incur high fees if you cancel your auto insurance soon after buying the policy.

When you cancel your policy, ask if you’re incurring any penalties. In most cases, you won’t have to pay a cancellation fee. If you do, it will likely be nominal — around $50, or a small percentage of your final premium.

If you’re facing high fees and switching to a new auto insurance provider, consider whether it makes more sense to wait until the end of your policy’s term. That said, if you’re saving a lot of money in premiums with your new policy, switching might be advantageous even with the fee.

Driving Without Insurance

Because it’s illegal to drive without insurance in every state except New Hampshire, your insurance provider usually notifies the local Department of Motor Vehicles (DMV) when you cancel your policy. The DMV will contact you to ask for proof that you have new insurance or have sold the car. If you don’t respond, the state may suspend your license and registration.

It’s critical not to allow your auto insurance coverage to lapse. Not only can lapses result in fines, they may also increase your premiums, because insurance companies will consider you a high risk. Even if you’re not using your car, insurance companies and the state consider a lapse to be driving without insurance.

If you’re selling your car or don’t need insurance for another reason, consider buying non-owner insurance. This type of policy covers you while driving a rented or borrowed car, and is much less expensive than a typical car insurance policy. It will also keep you continuously insured, which will help you save on future premiums if you purchase a car again in the future.

If you’re cancelling your insurance because you can no longer afford it, consider dropping to liability-only coverage or shopping for a cheaper insurance company.

How to Cancel Your Car Insurance

Once you’re ready to cancel your auto insurance, here’s how to go about it.

1. Often, your new auto insurance provider will cancel your previous insurance for you. It’ll handle everything, including contacting your former provider and notifying the state of your new insurance so you avoid a lapse in coverage.

2. If you’re switching providers, your current auto insurance company might want to convince you to stay. While insurance rates themselves are non-negotiable, your agent may identify auto insurance discounts or suggest other ways you can save on your auto insurance premiums.2
3. If you sold your car or need to cancel your auto insurance for another reason, you’ll have to do it yourself. Usually, a call to your insurance agent will suffice. Some companies require written notice. In any case, it’s a good idea to expect to fill out some paperwork.
4. Send your former insurer proof of your new auto insurance policy. Your new insurance agent can provide you with proof — an ID card should be adequate. That way, you won’t risk a lapse in coverage.
5. Keep in mind that if your account is set up for automatic payments, your insurance company will continue to withdraw money until you cancel your policy. If you purchase a new policy and forget to cancel your old one, you’ll end up with duplicate coverage. You may be able to receive a refund if you provide a policy declarations page proving you had duplicate coverage.
6. You will receive notice of your policy cancellation from your former insurance provider.

Remember that you still need auto insurance in these circumstances:

• Your car is in storage.
• Your car doesn’t run.
• You’re driving less.