How to Cancel an Auto Insurance Policy
There are a few reasons why you might consider canceling your auto insurance policy. Maybe you’re unhappy with the customer service, you want to find a cheaper rate or you’re moving to a new state and have to switch providers.
Terminating your car insurance policy is a multi-step process. If you’re not sure how to cancel car insurance, we’ll explain the steps in detail. It’s important to know how to cancel auto insurance, how much it costs to cancel and when you should cancel.
[ Read: Car insurance book: A Complete Guide to Car insurance (Auto insurance book, Understanding your car insurance) ]
Steps to canceling your car insurance
Canceling your car insurance policy is fairly easy, but it’s important to go through the formal cancellation process. If you stop making the monthly payments and assume your insurance company will get the hint that you want to cancel, you could find yourself in a sticky situation. Here is a brief overview of the steps you should take to cancel your car insurance policy.
- Contact your insurance company: First, call your insurance company or visit an agent in-person and let them know you want to cancel. The insurer will probably want to know why you’re canceling and try to negotiate with you if you’re canceling to get a lower rate. If a better deal is offered, you might decide to stay with your current insurer. If you prefer to move forward with the cancellation, an agent will explain the cancellation process and provide any paperwork you need to fill out.
- Send a written cancellation request: Most insurance companies require customers to send a written letter stating their intent to cancel their policy. The letter doesn’t need to be long, but it should provide a brief explanation of why you’re canceling. If it has something to do with the customer service or rate, make that known. You can hand-deliver a copy of the letter to your agent in-person or send a copy via mail or fax to the office. Keep in mind that a cancellation request letter usually requires your signature.
- Ask about cancellation fees: When you speak with an agent, be sure to ask about any cancellation fees or penalties for termination, especially if you’re canceling outside of your policy’s renewal period. If you paid your annual premium in full, confirm that you’ll recoup your pre-paid premiums for the months following the policy’s cancellation date. If you missed recent payments, you’ll need to settle up before you can continue with the cancellation process, and you might be charged a nonpayment fee.
- Get confirmation of the cancellation: The only thing left to do is get official notice that your policy has been canceled. Don’t assume that your policy is canceled before you receive a confirmation from your insurance company. Take note of the cancellation date, and make sure your new coverage begins at least one day before. That ensures you’re never at risk of driving without insurance coverage.
- Have your new insurance provider help with the transition: If you don’t want to deal with your old insurance company throughout the transition process, have your new insurance provider step in. An agent from the new company can request your old policy information, start and end dates and get a copy of your cancellation form from your old provider. Your new insurance provider will make sure that everything is squared away before your new policy takes effect.
How much does canceling my car insurance cost?
Most insurance companies don’t charge policyholders for canceling their car insurance policy if you notify them of the cancellation and go through the formal termination process. However, that’s not the case for every company. When you speak to an agent about canceling your coverage, make sure to ask about fees or penalties you’re responsible for.
If you stop paying your premium and use that as your official “cancelation notice,” expect to get slapped with some penalties. Your car insurance company won’t know if you aren’t paying because you want to cancel, or because you simply forgot to pay.
When you fail to pay your premium, the company will request the missed payments through your grace period, which is the duration of time between your last missed payment and when the insurance company can legally cancel your policy. This period usually lasts several weeks.
Another thing to consider is that leaving your car insurance company on bad terms could hurt your down the line. If you ever wanted to use your old insurance company again, you could be subject to higher rates because of your missed payment history. For that reason, formally notifying your car insurance company of your intent to cancel is the best move.
Can I cancel my auto insurance policy at any point?
You can cancel your auto insurance policy whenever you want to. It doesn’t have to be during your policy’s annual renewal period. However, it’s important to have your new auto insurance policy lined up before canceling your old one. Your old policy and new policy should overlap by at least a day or two to avoid driving uninsured or having a lapse in coverage.
Although you can cancel your car insurance policy at any point, many drivers switch after getting into an accident or getting a traffic violation that raises their rate. Oftentimes, you can automatically get a discount for switching car insurance providers. And if you find a car insurance company that offers better discounts and lower rates than your old company, you can avoid a major rate hike.
I canceled my car insurance, now what?
After you cancel your car insurance, the most important thing to do is to make sure your new policy is ready to go. Refer to your declaration page to ensure that your coverages, coverage limits, discounts, personal information and car details are accurate. Keep a copy of your proof of insurance in your vehicle, and keep a physical or digital ID card handy.
[ Read: Benefits of bundling home insurance with auto insurance]
Too long, didn’t read?
Cancelling your auto insurance policy is simple and straightforward. But for any driver, it’s important to go through the formal cancellation process and notify your insurance company of your intent to cancel. Failing to pay your premium is not the same thing as cancelling, and it could lead to more serious consequences down the line.
Before you cancel your auto insurance policy, it’s critical that you have a new policy lined up. If you cancel without a new policy, you could have a lapse in coverage, which can lead to higher insurance premiums in the future.