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Canceling Auto Insurance Policy Early

There are reasons you may need to cancel your car insurance early. However, you must keep in mind there may be some penalties affiliated with early policy termination. Reasons you may want to cancel your car insurance policy can include:

  • You may want to change insurance companies
  • You may be moving out of the jurisdiction
  • You may have sold the vehicle
  • You are unhappy with the customer service
  • You may not be currently driving the vehicle 

Below you will find some frequently asked questions pertaining to early car insurance policy termination. 

How Much is Car Insurance Cancellation Fee?

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Cancellation fees or penalties can range from as low as $25 and go as high as a percentage of your premium, depending on your insurance company’s policy. This is why it is always recommended to check the fine print in your car insurance policy before signing on the dotted line. 

Is It Bad To Cancel An Insurance Policy?

Yes, cancelling an insurance policy can negatively impact your insurance rates. Insurance companies anticipate you paying a full year of fees when you purchase the policy. This is why most insurance companies will charge a fee or penalty for cancelling the policy prior to renewal. 

Can I Cancel My Car Insurance Anytime?

Yes, however, there may be fees or penalties involved if you cancel your insurance before the end of the coverage period. Some companies may allow you to cancel your policy with no fees or penalties if you give them proper notice. 

How To Cancel Car Insurance Without Charges

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Essentially, the only way to guarantee you will not encounter any fees or penalties to cancel your car insurance is to cancel it at the end of the coverage period. However, some companies may allow you to cancel early if you provide them with enough notice. 

Can I Cancel My Car Insurance If I Pay Monthly?

Yes, you can. Regardless if you pay your car insurance premium all at once or make monthly payments, you can cancel your car insurance at any time. Keep in mind you entered into a one year contract for insurance coverage with your provider, so cancelling mid policy may result in penalties and administration fees. 

If I Cancel My Auto Insurance Will I Get A Refund?

Yes. If you cancel your auto insurance mid-policy you will receive a refund less any penalties and administrative fees you may incur. However, if you pay monthly, you may not have any covered periods to refund. If you pay the lump annual premium, you may be refunded the remainder of your coverage by a short rate or pro-rated. You will also most likely have to pay a penalty for cancelling prior to the expiration of your policy.

Fees and Penalties For Cancelling Car Insurance Prior To Coverage Ending

There are typically 2 formats for calculating fees pertaining to early car insurance policy cancellation. These are:

  • Short rate 
  • Pro-Rata

Most often, insurance companies that charge a penalty for early cancellation of car insurance policies will cancel your policy under the short rate method. This is when the insured decides to cancel the policy. Cancellation fees can vary from insurance company to insurance company. However, when an insurance company decides to cancel your car insurance policy prior to the end of the coverage period, they will cancel your policy pro-rata. In this instance, if you paid the full year premium upfront, the company will refund you any unearned premiums. This means the months you have not yet been covered under for the remainder of the policy. 

How To Cancel A Car Insurance Policy Early

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To keep your car insurance history in good standing, it is important that you take the proper steps to cancel your car insurance. Follow the steps outlined below to cancel your car insurance to keep your car insurance history in good standing.

  1. Research Other Car Insurance Providers

If you are still keeping your vehicle and are planning to drive it, it is very important to have alternate car insurance in place prior to cancelling your old car insurance policy. You must have car insurance to drive your vehicle, it is the law. If you are cancelling your car insurance early to obtain a better rate elsewhere, do your homework. Contact several car insurance providers to obtain quotes. Ask what the car insurance providers have to offer for bundling other types of insurance such as home, cottage, boat and life insurance.

  1. Contact Your Insurance Provider

As soon as you have decided you would like to cancel your car insurance, contact your insurance provider right away. You can do this either by email, in person, or over the telephone. The agents will be best suited to advise you on the steps you need to take to cancel your car insurance. The service provider agents may also be able to offer you suitable options relating to your cancellation. The agent will also advise you what your penalties and fees will be to cancel your car insurance early. Ask the agent what is required of you to cancel the auto insurance policy early.

  1. Cancel Your Current Car Insurance Policy

Once you have made the decision to cancel your current car insurance policy, follow the instructions that your service provider agent has given you. You may be required to submit a Car insurance policy cancellation letter. At this point, you may be entitled to receive a refund, or you will have to pay the penalties and fees involved in cancelling your car insurance early.

The Disadvantages of Cancelling Your Car Insurance Early

Depending on your reasons for cancelling your car insurance early, there are certain disadvantages to doing this such as:

  • You will have no protection for your vehicle
  • A pause in insurance coverage could negatively impact your future rates
  • You will lose the advantage of bundling multiple policies for lower rates
  • Your transportation options will be greatly reduced

It is highly recommended that you research all your options prior to cancelling your car insurance early. 

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