How to Cancel Car Insurance the Right Way
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There are many reasons for canceling an auto insurance policy. You may want to save money, or you’re moving to a new city or state. Perhaps your circumstances have changed: You’re selling your vehicle, or you can no longer drive. Whatever the reason, canceling your current auto insurance policy can mean a fresh start and several hundred dollars in savings on your annual premiums.
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Learn more about how to cancel car insurance by reading this helpful step-by-step guide. We’ll answer the most frequently asked questions about the process.
Reasonable Grounds for Canceling an Auto Insurance Policy
There are many reasons to cancel your car insurance policy. One of the most common is to save money. Each auto insurance company uses proprietary rating systems to calculate the cost of premiums differently for drivers with the same driving records. Comparing quotes from multiple companies can save you an average of $720 a year.
You may want to cancel your auto insurance policy because of a pending move to a new city or state. Moving out of state will force you to shop for new coverage because insurance policies don’t transfer to different states (though your provider may offer you a new policy if they operate in that state). Even if you’re staying in the same state, your address affects your car insurance premiums, so a cheaper policy may be available.
Finally, life happens. Plenty of personal circumstances may lead you to cancel your current policy. These life events may be minor, like selling your vehicle, being added to another person’s plan, or major like losing your ability to drive.
How to Cancel Car Insurance in 4 Steps
Canceling an auto insurance policy is truly easy. Here are the four steps to take:
1. Call Your Insurer
The first step is to call your insurance agent and ask about the cancellation policy. Some insurers accept cancellations with a phone call to the agent’s office. Others may require mailing or faxing a written cancellation request complete with your name, date, policy number, desired date of policy cancellation, and signature.
After filing a cancellation notice, your insurance agent may pull out all the stops to lower your premiums and keep you as a customer. Expect discounts or recommendations on how to reduce liability limits. You may also be encouraged to drop miscellaneous coverage such as uninsured motorist coverage, roadside assistance, or rental car reimbursement. If you like the sound of their offer, do not be afraid to enter negotiations to obtain the rate you want.
2. Ask About Refunds
Most auto insurance policies are paid upfront, resulting in prorated refunds for the amount of unused premiums. For example, a $1,200 annual policy canceled after six months will result in a $600 refund from your insurance company. If you cancel before the renewal period, you may be assessed an early termination penalty that may be deducted from the refund, depending on the insurer.
And be prepared to wait: Refunds can take anywhere from a few days to a few weeks.
3. Get Confirmation in Writing
No matter what, always request cancellation confirmation from your auto insurance company in writing.
Here are some sample insurance cancellation letters to ensure you cover all the necessary information. Keep your letter straightforward and to the point. Avoid lengthy paragraphs and keep it to three or four sentences at most. Provide an effective date of policy cancellation and request a refund and written confirmation of the cancellation within 30 days.
4. Work on Obtaining Another Policy
When you obtain new coverage, make sure that the policy’s effective date matches the end date of your old or current policy‘s coverage. Even a single day of lapsed coverage could force insurance companies to report your status to your state’s DMV, resulting in a suspended driver’s license and registration, fines, and reinstatement fees.
Also, your insurance rates will go way, way up. If you hit someone while you’re uninsured, you’re — how can we put this? — screwed. You could be personally liable for the other driver’s property damage and injuries, which could mean paying thousands and thousands of dollars.
Answers to Frequently Asked Questions About Canceling Car Insurance
Here are some commonly asked questions about canceling car insurance, including scenarios such as what to do if you get rid of your vehicle and how lapsed coverage can affect your credit score:
What If I Only Want to Pause My Car Insurance Policy?
Sometimes, pausing your auto insurance policy may better serve your life circumstances, such as extensive travel abroad. Suspending your coverage temporarily removes you from your policy. You will not need to pay for insurance while your car is out of commission. In this case, you’ll need to store your car somewhere secure (not out on the street) and obtain proof that it’s not in use. Some insurers allow you to keep comprehensive insurance while not using your car but drop liability or collision coverage.
Do I Have to Call to Request Cancellation?
You don’t have to actually speak with your carrier to cancel your car insurance policy. But you will need to contact your new insurance company and request assistance. The new agent will likely ask for your last auto insurance carrier’s name, old insurer policy number, requested date of cancellation, and signature before reaching out to your old policy provider and completing all the paperwork.
What If I Get Rid of My Vehicle and Drive Other People’s Cars?
If you plan to forgo your own vehicle and drive other people’s cars, you will be on the hook for non-owner car insurance. Also referred to as non-driver insurance, this insurance covers bodily injury and property damage when driving vehicles policyholders don’t own. Drivers may also opt for uninsured/underinsured motorist liability insurance, towing services, and personal injury protection.
In most cases, non-owner insurance will not include comprehensive or collision coverage.
If I Cancel My Auto Insurance Policy, Will I Be Charged a Fee?
Each carrier sets its cancellation fees and terms. Most insurance providers charge a small fee and prorated refund based on your unused premium or the number of days or months left until policy renewal. Check the fine print of your insurance contract for all associated fees and penalties, including hidden penalties affecting other coverage (e.g., bundled discounts with auto and homeowners insurance).
Will Canceling My Auto Insurance Policy Affect My Credit Score?
Canceling your insurance policy will not directly lower your credit score. However, canceling your car insurance without having another policy in place will create lapsed coverage, which will impact your credit score. If your car insurance cancellation takes effect at midnight on April 23, your new car insurance policy should start at midnight on April 23. It’s OK to have some overlap, too.
As we mentioned, any lapse in auto insurance coverage may force insurance companies to notify your state’s DMV, resulting in a suspension of your driver’s license and vehicle registration. In addition, non-payments will result in higher premiums, fines, and account turnover to a collection agency, the ultimate credit-score killer.
Can I Cancel My Car Insurance Policy Before It Starts?
If you decide to cancel a new car insurance policy that starts in the future, most insurers will not assess any penalties and offer a full refund.
Shop Around for the Best Car Insurance Rates
There are many reasons why policyholders cancel an auto insurance policy. Understanding how to cancel car insurance can open the door for competitive-rate shopping between different auto insurance companies. If you don’t shop around, you’ll never know if another insurance company is willing to offer you cheaper car insurance for the same amount of coverage.
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