How Do I Cancel My Car Insurance

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By Aren Mirzaian

First published on January 31, 2023

3 minute read

MyChoice follows a strict content review process designed to ensure reliable and unbiased information.

Cancelling a car insurance policy early can be a bit tricky, depending on your insurer and how much time remains in the policy term.

How Much Does It Cost to Cancel Car Insurance?

Cancellation charges can vary depending on the following factors:

Any outstanding premium payments
Non-refundable provider fees
The time remaining on the term of your policy

Generally, the closer your cancellation date is to your renewal date, the lower the cancellation penalty because the insurer has already earned more of the premium. Read the fine print to see what fees apply if you cancel before that date and what you need to submit to cancel your policy.

How to Cancel Your Car Insurance Policy

Planning to cancel your car insurance policy? Here are the steps that you need to follow:

Step 1: Prepare Your Policy Information for Documentation

You’ll need your policy number and personal information, like your birth date. If you’re getting coverage from a new insurer, you’ll need your new policy number, the provider’s name and the policy effective date.

Step 2: Read Your Policy and Inform Your Insurer

Check your policy’s cancellation requirements, as each provider has a different protocol. You also need to speak to your car insurance provider so they know about your decision.

Step 3: Submit the Required Documents

Insurance companies may require a cancellation letter or other documents within the notice period. Keep these requirements in mind, including the deadlines for completing them. Many insurers require a written request or cancellation form to confirm the policy termination.

Step 4: Ask About Any Refunds or Cancellation Fees

Some providers have different cancellation fees depending on when you cancel your policy. Others will give you a pro-rated refund on premiums you’ve already paid.

Step 5: Contact Your Lender, If Applicable

If you’ve taken out a car loan, tell the lending institution or bank that you’re cancelling your policy and switching to a new insurer.

Step 6: Make Sure Your New Policy Is in Force Before the Old One Is Cancelled

You shouldn’t have a gap in insurance coverage, so make sure your new policy is effective before you cancel the old one. Driving without car insurance can lead to fines and penalties, especially if you get into an accident.

Step 7: Get Your Notice of Cancellation

Keep a copy of this notice for your personal records. As a precaution, don’t settle for verbal confirmation by phone or in person. Ask your car insurer for official written confirmation.

Can I Get a Refund on My Car Insurance Policy?

If you paid your premiums upfront, you may receive a refund for the unused portion of the policy after cancellation, depending on the insurer’s cancellation method. If you pay monthly, you may still owe outstanding premiums or cancellation charges.

Companies will generally calculate your refund through either short-rate cancellation or pro-rated cancellation. Here’s the difference between the two:

Short-rate cancellation: You’ll receive part of your unused premium, but your car insurer will apply a penalty for cancelling your policy early.
Pro-rated cancellation: You’ll receive a refund based on the unused portion of your policy. For example, if you paid for a year of coverage but cancelled four months before the renewal date, you may receive a refund for part of the remaining term.

Can I Cancel My Car Insurance Without Incurring Charges?

You may be able to avoid an early cancellation charge by ending the policy on its renewal date. It’s best to inform your insurer ahead of time that you’ll be cancelling your policy effective on that date.

Can My Insurer Cancel My Car Insurance Policy?

Yes, your insurance provider can cancel your car insurance policy if you’ve missed payments or provided misleading information related to the policy. An insurer may also cancel a policy if you fail to report a material change.

If you notice that you missed a payment or receive a late-payment reminder, contact your insurer immediately.

Can I Cancel My Car Insurance Policy With an Open Claim?

Yes, you can cancel your car insurance policy even with an open claim. Your former insurer will continue handling the claim because the incident happened while its policy was in force.

A cancellation fee may still apply. You should also disclose the claim to your new insurance provider. Not disclosing required information to the new insurer can affect your policy.

Common Reasons to Cancel an Existing Car Insurance Policy

These are some common reasons why drivers cancel their car insurance policies, even if they have to pay cancellation charges:

More affordable premiums: You may have found a good car insurer that offers lower rates for the same level of coverage.
Discounts by bundling: A car and home insurer may be offering a good discount if you get them to insure both your house and your car. Alternatively, you may have chosen a multi-car insurance policy with a spouse or family member because it results in cheaper premiums.
No more car to cover: You may have decided that you don’t need a car anymore, so the policy is equally unnecessary.
Poor customer service: You may simply be unsatisfied with the way your insurer handles claims, customer concerns and queries.