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Penalty for Cancelling Car Insurance Early?

Written by Michele Wilmonen. Posted in Ask An Insurance Question Last Updated: 02/01/2017

A: Hi, I cancelled the insurance during 8th month for a 12th month policy.The insurance company charged me for full 12 months and have a debt collection agency collect the money. They havent added any cancelation charge which would be 10% of remaining 4 months charge.
Does the cancellation charge be remaining 4 months payment ??. I cancelled the policy on December 10th 2 days prior to the next months due date.


Q: You need to talk to your agent or car insurance company about this.  This sounds like a North Carolina short rate issue, but I don’t know without having more information.  With North Carolina short rate though, I do believe it’s not 10% of the remaining months of the policy term, that it’s 10% of what the total premium was. Some companies do have a cancellation penalty, which this could be also.

Also I would need to see your billing history to be able to give a good answer. Some payment plans you are paying exactly a month ahead, some you are paying two months ahead, and some you are paying two week behind and two weeks ahead. If you have changed you payment due date this could screw up what time period your payments are paying for. Also, if you have made any changes to your policy you could owe back earned premium that they are charging you for.

So, the best thing to do is to have your insurance company explain exactly what you are charged for or even ask for them to send you a written billing breakdown with a running balance to show you what you paid for and any changes.

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Michele Wilmonen

Michele's first introduction to insurance was working for a major insurance company as a file clerk and a mailroom supervisor in a regional office. She learned insurance directly from underwriters and claims adjusters from questions and also watching them do their job. Since then, she's earned a number of insurance certifications from the Insurance Institute of America and also a Bachelor’s degree from the University of Idaho. She blogs at Car Insurance Guidebook.

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