
What happens when you cancel your auto insurance in the middle of a billing cycle?
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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.
Yes, generally you can cancel your auto insurance at any time. You should receive a prorated refund for any unused premiums. In some cases, you may have to pay a cancellation fee, especially if you cancel shortly after the policy start date.
Whether you pay monthly or in advance, most insurance companies allow you to cancel your policy regardless of where you are in the billing cycle. You will need to give proper notice, though. That means informing your provider that you’re canceling the policy rather than simply stopping payment. Some companies ask you to give 15 or 30 days’ notice when you cancel.
Some insurance companies require 30 days’ notice when you cancel your auto insurance policy. Check with your provider to ensure you follow the cancellation requirements.
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.
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.
Once you’re ready to cancel your auto insurance, here’s how to go about it.
If you are switching insurers, your new company will notify your insurer for you, often with a quick insurance cancellation phone call to customer service. The company might charge a cancellation fee or not reimburse you for unused premium, however.
If you give your insurance provider proper notice and follow the necessary cancellation steps, canceling your auto insurance will not affect your credit score.
However, if you don’t officially cancel and instead stop paying your premiums, it will harm your credit. It may also make your next auto insurance provider see you as a high risk and charge you more for insurance. That being said, if you have poor credit, you can still buy a car and get auto insurance. Check out our roundup of the best auto loans for bad credit and get an auto insurance quote with no credit check now.
There are some exceptions to your credit score affecting your auto insurance costs. In Massachusetts, Michigan, Hawaii, or California, insurance providers can’t take credit scores into account when determining premiums.
If you stop paying your auto insurance premiums, your provider will cancel your policy, but you’ll hurt your credit. Instead, follow the proper steps for canceling your policy.
Remember that you still need auto insurance in these circumstances:
In general, you can cancel your auto insurance at any time and receive a prorated refund for any unused premiums, minus cancellation fees. Before you cancel your auto insurance, make sure you have a new policy in place to avoid illegally driving without insurance. Often, your new provider will cancel your old policy for you. If you sold your car, consider buying a non-owners policy to maintain a history of coverage.
As long as you give your insurer proper notice, cancelling your auto insurance should not affect your credit. If you simply stop paying your premiums, rather than canceling, it may hurt your credit.
Ultimately, as long as you give proper notice and maintain auto insurance coverage when you need it, you can cancel your auto insurance at any time. Learn more about cancellations and nonrenewals.
Can you get a refund on car insurance? Progressive. (2025).
https://www.progressive.com/answers/refund-on-car-insurance/
Insurance Costs and the Age of Coronavirus. J.D. Power. (2020, Aug 20).
https://www.jdpower.com/cars/shopping-guides/insurance-costs-and-the-age-of-coronavirus