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Canceling a car insurance policy is a relatively simple task, but it's important to follow each step to make sure the process goes smoothly. You may consider canceling your car insurance policy if you're replacing it with a policy from a different carrier, you're moving out of state, you're selling your car or you simply no longer have plans to drive.
Here are four steps you can take to cancel your car insurance policy.
1. Contact Your Insurer
The process of canceling an insurance policy can vary from carrier to carrier, but your best bet is to either call customer service or visit the agency to speak with your agent in person.
Some insurance companies may require that you provide your request in writing. If not, it may still be a good idea so you have a paper trail.
Your current insurance company may ask your reason for canceling and, in the event that you're moving to another state, may offer to issue a new policy based on your new address. But if you've shopped around and found a cheaper policy with another carrier, be firm about your wish to cancel.
2. Ask About Refunds
Auto insurance policies are typically paid upfront, which means that if you cancel yours in the middle of your policy term, you're entitled to a refund of the remaining portion.
In most cases, you'll receive a prorated refund. For example, if you paid $600 for a six-month policy and you're canceling after four months, you'll receive $200 back from the insurance provider. In this case, there's usually no cancellation fee.
However, some insurance companies may use what's called short rate cancellation. With this method, the insurer determines the refund rules and may retain a portion of your unused policy premium as a penalty for early termination.
Insurers will typically issue the refund to the original payment method but double-check with your carrier, so you know where to look.
3. Get Confirmation of the Cancellation
When you request to cancel your car insurance policy, you can generally expect it to happen. But it's still important to ask for confirmation so you have something to fall back on if you get charged again or run into other issues.
You'll first want to get confirmation from the agent or customer service representative about when the policy will be canceled. If you're replacing it with a new policy, make sure there's no lapse in coverage—we'll cover why in a minute.
You'll also want to receive written confirmation after the policy has been terminated. You may receive this in the form of an email or a letter in the mail. Check with your carrier to find out how it generally handles confirmations.
4. Have Another Policy in Place
Unless you have no plans to have car insurance again in the future, it's a good idea to have another policy in place before your current one is canceled. There are a few reasons for this:
- Higher rates: Car insurance companies typically charge higher premiums if you're found to have a lapse in coverage. The penalty is relatively small for a short lapse, but it grows the longer you're without insurance.
- Personal liability: If you're uninsured even for one day and cause an accident, you'll be on the hook to pay for damage and any injuries.
- Driving privileges: Most states require that you have car insurance coverage to drive a vehicle. So if you're pulled over and don't have a current policy, your driver's license may be suspended.
- Repossession: If you have an outstanding loan on your vehicle, your lender likely requires that you maintain a minimum amount of coverage on the car. If the lender receives notice of the cancellation from the insurance company but doesn't receive any information about a new policy, it may choose to repossess the vehicle.
Note that if you're selling your car and not replacing it, it may still make sense to purchase non-owner car insurance to avoid penalties for a lapse in coverage and to cover you when you drive other people's vehicles.
The Bottom Line
There are several reasons to consider canceling your car insurance, but it's important to walk through each step to make sure you do it correctly and receive confirmation that it's been completed.
It may also be a good idea to have another policy in place, even if you're selling your car, to avoid the potential consequences of not having any coverage at all. Compare quotes with different insurers to get the best deal if you plan to leave your current insurer. Think carefully about your situation and future driving plans to determine the best approach.