There are several reasons you might need to cancel a car insurance policy. For example, maybe you no longer own the car in question. Or you're moving to another state. Or you want to switch to a less-expensive insurance company. Whatever your reason, the process should be relatively straightforward. Here's how to go about it—and avoid some pitfalls.
- You can cancel your auto insurance policy whenever you want.
- If you're keeping your car you should arrange for other insurance first to avoid a lapse in coverage.
- Virtually every state requires drivers to have at least a minimum amount of insurance coverage.
How to Cancel Your Car Insurance Policy
Depending on your insurance company's rules, there are a variety of ways to cancel your policy.
- Call your provider. Most major companies simply ask that policyholders speak with an insurance agent to cancel. The phone number will likely be found on your insurance card, as well as on the company's website or app. This is often the quickest method, although you may still have to sign a cancellation notice or other documents to make it official.
- Mail or fax your cancellation. If your insurance provider is more old-fashioned, you may need to send a cancellation letter either to your agent's office or directly to the company.
- Visit the office. If the insurer has physical locations nearby, you can stop in and handle the paperwork in person.
- Have your new insurer deal with it. If you're cancelling your policy because you're switching to a new insurance provider, it can initiate the process and guide you through it.
Note: What you don't want to do is simply let your policy lapse and not notify your insurer that you're cancelling. In that case, the insurer might continue to bill you and report your failure to pay to the credit bureaus, potentially damaging your credit score.
What Happens When You Cancel Your Policy
When you cancel an auto insurance policy, your insurer will likely notify your state that you and your vehicle are no longer insured. Because it's illegal to drive without insurance in virtually every state, your state's department of motor vehicles may ask you for proof that you either sold the vehicle or have obtained other insurance. If you don't respond, the state can suspend your registration and driver's license. In some states you may also be required to return your license plates.
If you still have time left on the policy, your insurer may issue a prorated refund of the premium you paid most recently. However, some insurers also charge a cancellation fee if you want to get out of your policy early.
If you're switching insurance companies, make sure to have the new policy lined up before you cancel the old one—and tell the new insurer exactly when your old policy is set to expire. Lapses in car insurance are illegal in many states and can result in fines. If you have an outstanding car loan or lease, you should also notify your lender that you have changed insurers.
If you're cancelling your policy because you're moving to a new state, note that you will typically have to show proof of insurance when you register your car there. States have different rules regarding the types and amounts of insurance you're required to carry.
What if Your Insurance Company Cancels Your Policy?
You are not the only one who can cancel your auto insurance policy. The insurance company can cancel it, too.
However, that happens only in limited situations. According to the Insurance Information Institute, the insurer can't cancel your policy if it's been in effect for 60 days or longer unless:
- You didn't pay the premium.
- You committed fraud or made serious misrepresentations in your insurance application.
- Your driver's license has been revoked or suspended.