When and how to cancel your car insurance policy

Car insurance for your vehicle is essential, but you may not always need it. While you are likely required by law in most states to carry appropriate coverage anytime you are actively using your vehicle, there are a few situations where you may need to consider canceling your car insurance. Fortunately, this process can usually be completed in a few simple steps, whether you need to cancel your coverage temporarily or permanently.

How to cancel your car insurance

Google “how to cancel insurance policy” or “how do I cancel your car insurance” and you will get a variety of results. However, the process is relatively easy. Follow these steps to make your auto policy cancelation experience as smooth as possible:

  1. Purchase a new auto policy before canceling your existing coverage: You may choose to cancel your current policy at any time for a variety of reasons. However, choosing to do so without having a new policy lined up to take effect on the same day as the prior policy’s cancelation date could leave you at risk financially. Additionally, a lapse of coverage could cause you to have higher car insurance rates and be considered as breaking the law in your state.
  2. Contact your auto insurer: You will want to get in touch with your carrier to initiate the policy cancelation process, but there are multiple ways to take care of this. Depending on your preferences and the options available from your carrier, you may call your insurer (the number is often found on your insurance card or the company’s website), contact an agent through the company mobile app, mail in a cancelation request or call your insurance agent.
  3. Speak with a licensed agent about cancelation: Each auto insurer will likely have different process for canceling a policy. For example, some carriers may require you to pay a cancelation fee or provide a minimum 30-day notice ahead of your cancelation date.
  4. You may be required to sign a cancelation letter: Cancelation letters are not as commonplace as they once were due to the convenience of email and online forms; however, some auto insurers may still ask that you send a letter requesting your coverage to end. The letter typically includes your policy number, name and date you want your policy canceled. If you paid for your policy upfront and have remaining months of coverage, you may also choose to include a refund request for the unused portion of your policy.
  5. Once finalized, request a policy cancelation notice from your auto insurer: Carriers will generally send a notice confirming that your policy has officially been canceled. If you do not receive a notice, you may ask that your insurer provide one to ensure you have a written record of the transaction.

When you should cancel your car insurance

You may need to cancel your car insurance for various purposes, but it is important to consider your plan for being without coverage beforehand. For drivers making a carrier switch, purchasing a new policy ahead of your current one’s expiration is a good practice. If you are making a permanent cancelation, consider talking through your situation with an insurance agent to ensure that missing coverage will not put you at legal or financial risk.

When you move

If you move to another state where your current insurance company does not offer coverage, you will need to get a policy from an auto insurer that offers coverage at your new location. Arrange for the new policy a few weeks in advance to avoid a lapse in coverage.

When you do not have a car

When you sell a vehicle with no plans to replace it, you can cancel your auto insurance. However, it is usually a good idea to hold off on discontinuing coverage until the new owner takes possession and the title has been transferred.

When you want a better deal

You may decide to switch your auto insurance provider to get a better rate. Again, it’s usually a good idea to switch to a new policy before dropping your current coverage. The end of a policy term is typically the best time to switch insurers. You should start shopping for a new insurance company at least six to eight weeks before the end of the policy term, so you have ample time to secure new coverage.

When you want to reduce coverage

If you have an older vehicle you own outright, you might consider dropping optional collision and comprehensive coverages. Consider the risks before dropping any coverage. It is important to note that if you discontinue collision and comprehensive, you will have likely to pay out of pocket if your car is damaged or stolen so you need to be prepared financially.

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When you should not cancel your car insurance

While you can cancel your auto policy at any given time, you may not always need to. Before canceling your coverage, it may help to think through why you no longer need insurance and create a strategic approach to prevent potential legal or premium-related issues.

When you will be driving

Canceling coverage on a vehicle you still plan to drive may not be the best idea, as it could put you at financial risk and potentially violate state laws. Speak with a licensed insurance agent to learn more about how driving your vehicle without insurance could affect you.

When you move

Moving does not automatically require you to get a new auto policy. Before moving, contact your current auto insurer to find out if you can transfer your coverage to the new state. Moving can cause your rate to change because location is a factor in determining premiums. If your current insurance company operates local agencies, you might need to choose a new agent as well.

When you have life changes

You might want to keep your auto insurance policy when you get married or divorced. You can add a new spouse to your current auto policy and sometimes even earn a discount for tying the knot. You may also qualify for a multi-policy discount if you and your new spouse have insurance with the same company. If you get divorced, you can typically remove your ex’s name from your current policy instead of canceling the policy altogether.

When you are only temporarily not driving

Some insurance companies allow you to suspend your coverage if you put your vehicle in storage for 30 days or longer. That can come in handy if you go on an extended vacation or need time to recuperate from surgery. However, if you are still making car payments, you must typically get approval from the lender to suspend coverage. The suspension process can vary by state. In some states, you can call your agent to make the request, but in others you will need to send a written request. If you cancel your auto insurance policy instead of suspending it, you could incur a rate increase when you purchase a new policy due to a lapse in coverage.

When your premium is high

A high premium doesn’t necessarily mean you need to cancel your coverage. Most auto insurers offer several types of discounts. You may qualify for a discount for driving safely, taking a virtual driving course or reporting your car’s safety features, such as airbags or anti-lock brakes. Contact your agent to find out how discounts can lower your rate.

If I cancel my auto insurance, will I get a refund?

If you paid your premium in advance and cancel your policy before the end of the term, the insurance company must refund the remaining balance in most cases. Most auto insurers will prorate your refund based on the number of days your current policy was in effect.

The insurance industry is highly regulated and each state has insurance statutes that govern how companies must handle refunds. In Nebraska, for example, an auto insurer must contact you within 15 business days of cancelation to inform you about any eligible refunds. In many states, like Texas, if you finance your premium through a premium finance company, the insurance company may return the unused premium to the finance company, not you.

Unless otherwise stated in a statute, auto insurance companies usually do not have the obligation to refund your money within a given time period. Most insurance contracts typically state that the company will issue a refund “within a reasonable timeframe.” To avoid refund headaches, it’s best to notify your auto insurer of your plans to cancel when it’s time to renew your policy. Check with your carrier before canceling to learn what the policy cancelation terms are.

Car insurance cancelation fees

Depending on the auto insurance company, canceling your policy before the end of its term may result in a cancelation fee. State laws can determine if a fee is allowable, and, if so, it is up to the insurer to set that fee, which is often taken out of the prorated refund.

If you’re asking your provider about cancelation fees, make sure they are taking your state into account as some states have fees while others do not.

What happens if you stop paying your premiums without canceling your car insurance policy

If you want to discontinue your insurance coverage, you will need to contact your insurer or your agent. If you stop paying your premiums, but haven’t canceled your policy, your carrier can continue requesting payment from you throughout your policy’s term. You will be charged for the time your policy was active without payment.

Failing to properly notify your auto insurer that you want to cancel coverage may even impact your experience of finding auto coverage in the future. Even if you intend on finding a new car insurance company, missing payments entirely could lead to poor payment history and make finding affordable rates more difficult. Similarly, if you have automatic bank account withdrawal enabled to pay your premiums, you may continue to pay for coverage that you do not intend to keep.

Frequently asked questions

Should I cancel my car insurance if I go on an extended vacation?

Because gaps in coverage may negatively impact your future premium rates, foregoing auto insurance – even for an extended vacation – likely is not worth it. If you plan to be away for a month or longer and your vehicle will not be in use, there may be other ways to save on your premiums without canceling your policy. For instance, you might consider removing your optional collision coverage while your car is garaged to reduce your monthly premium.

Do I need to cancel my policy if I move to another state?

When you move, you will need to register your vehicle in your new state of residence and purchase a policy that aligns with its auto insurance laws. Many major insurance providers operate in all U.S. states and Washington D.C., so you may be able to stay insured under your current carrier even if you need new coverage. Ask your insurance agent if your current insurer operates in the state where you plan to move.

Can I cancel some coverages without canceling the entire auto policy?

Many drivers choose to drop expensive coverages such as optional comprehensive and collision after they pay off their vehicle. You may drop non-essential coverages and keep required liability policies.

Do I need to do something specific to cancel if my car insurance company drops my coverage?

If your current auto insurer dropped your coverage, this means the policy is already canceled. While you will not need to take any additional steps to terminate your policy, you will need to find a new insurer if you do not already have one to avoid a lapse in coverage.

The post When and how to cancel your car insurance policy appeared first on Bankrate

Original source: Bankrate

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