How To Cancel Your Insurance Policy in Six Easy Steps
So you’ve been looking at quotes on Compare.com and wow! You find out that you’ve been paying way too much for your car insurance. If you switch now, you’ll save a ton — but first, you have to cancel your old insurance.
Sounds simple… but how hard is it, really, to ditch your insurance? On a scale from cancelling Netflix (one click) to cancelling your gym membership (ugh), cancelling car insurance is somewhere in the middle. We’ll walk you through it…
1. Make Sure You’re Cancelling for the Right Reason
There are several great reasons to cancel your car insurance. For example:
- You’re switching car insurers to save money, or because you’re moving to a new state
- You’re being added to another person’s plan
- You’ve sold your car and you don’t plan to drive anytime in the near future
- You’re no longer able to drive
- You’re able to post a surety bond or other proof of financial responsibility, and your state accepts that as an alternative to car insurance
There are some not-so-great reasons too. You may be tempted to cancel your car insurance if your car’s out of commission, if you’ve sold your car, if you’re not driving much or if you just can’t afford it. These are not good reasons to cancel, however. Having a lapse in coverage — even for just a few months — can raise your rates in the future, wiping out any money you saved by cancelling your car insurance policy.
If you’re caught driving without insurance just once, you can face serious penalties like fines, a driver’s license suspension and even jail time. Also, your insurance rates will go way, way up. If you hit someone while you’re uninsured, you’re — how can we put this? — totally screwed. You could be personally liable for the other driver’s property damage and/or injuries, which could mean paying thousands and thousands of dollars.
So don’t cancel your insurance on a whim. Make sure you have a good reason!
2. Consider Alternatives to Cancelling Your Car Insurance, Like Suspension
Suspending your car insurance — keeping your policy, but making it inactive for a period of time — or reducing your coverage may be the best options if you plan to resume driving your car at some point in the future. If you’re traveling abroad for a while, for instance, but you’re not selling your car, suspension can be the right way to go. You’ll need to store your car somewhere secure (not out on the street) and obtain proof that it’s not being used. Some insurers allow you to keep comprehensive insurance while you’re not using your car, but drop liability/collision.
3. Keep Paying Your Car Insurance Premiums Until You’re Officially Ready to Cancel
If you stop paying without formally cancelling your policy, your insurer may assess late fees, cut off your coverage and even ding your credit.
If you have a car loan that requires you to carry collision/comprehensive insurance on your vehicle, you can get into an extra-sticky mess if you let your insurance lapse without formally cancelling. To protect its investment in your car, your lender may have the right to force-place insurance on the car. Force-placed insurance is a limited policy that covers the car only — not your personal liability. It’s super-expensive and is definitely not something you want to have.
4. Find Your Insurance Company’s Cancellation Policy
Every insurer has its own rules for cancelling auto insurance. For some, it’s as simple as making a phone call. Some want you to make the request in writing. You can find sample insurance cancellation letters online. Some insurers may charge a cancellation fee, and some want 30 days’ notice.
The best way to sort it out is to call your insurer and ask what you have to do. They may be able to handle it for you over the phone. When you contact your insurance company, you can also ask your rep about alternatives to cancelling your car insurance. They may be able to recommend a cheaper plan, or help you decide if dropping collision coverage is a good way to go.
5. Confirm Your New Insurance Begins as Soon as Your Old Policy Ends
You don’t want a gap of even a day, so make sure the transition is seamless. If your car insurance cancellation takes effect at midnight on 4/23, your new car insurance policy should start at the exact same time. It’s OK to have some overlap, too.
If you’re really cancelling your car insurance for good (and not buying a new policy), call your state’s department of motor vehicles. Your state may require you to cancel your vehicle registration and/or turn in your license plates when you cancel your car insurance. If you don’t, you could be charged a fee — or show up in a state database as an uninsured driver.
6. Check to Make Sure You Get Your Money Back!
Are we done yet? Almost! The last step is to check your bank account. Even if your insurer charges you an early cancellation fee, they still should refund the premiums you’ve paid for the remainder of the month or the six-month term. When you call your insurer to cancel, ask the rep how much money you’re getting back and when you can expect to be reimbursed.
Just remember, the best way to find the lowest-cost car insurance is to get quotes from multiple insurers. And the best place to do that is Compare.com.