Cancel Your Car Insurance and Get a Refund
When switching policies, why you should cancel your auto insurance and what happens if you don’t.
Cancelling your car insurance the right way.
If you’ve switched auto insurance policies, it’s time to cancel your car insurance. After all the hard work of shopping, quoting, and buying a new policy, you’re not finished with the process until you’ve cancelled your old policy. But why is it a big deal? More on that below.
Switching Auto Insurance Policies
You finally have that new policy where you’re saving hundreds of bucks on your car insurance. You might think that’s all there is. After all, don’t all these insurance companies talk to each other? Once you buy a policy from Company B, doesn’t Company B’s agent give Company A’s agent a call and tell them you switched your policy. If only things were that easy. Insurance companies are not responsible for that part – you are.
Fact is, once you switch policies, the old company doesn’t know anything about it. That means you’ll be double-covered, paying double premiums if you don’t cancel your old policy. One problem with this situation relates to the insurance companies. They don’t like it when there’s double coverage. If there’s an accident, there could be an issue about who will pay for the accident.
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Worse yet, if you don’t pay the other premium, then the old company will cancel you for non-payment. That event goes on your credit report. Essentially, if you don’t cancel your old policy, it could affect your credit, your ability to get a MasterCard, finance a car, or even buy a new home. It’s that important. Bottom line – don’t let the policy cancel itself.
How To Cancel Your Old Auto Insurance Policy
It’s easy to cancel your auto insurance policy. Simply call your old insurance company and request to cancel your auto policy. Give a specific date for the end of your coverage. There’s no need to overlap coverage from the old policy to the new policy. For instance, if you have a new policy starting on February 25, then cancel your old policy effective February 25.
Each company operates differently. They may require you to sign a cancellation request, or they may allow you to just cancel it over the phone. It sometimes depends on your relationship with the company or agency. Check over the paperwork, sign whatever they want you to sign, then you’re done with the insurance company. If you’ve financed the car, make sure you update the bank with your new insurance company information.
By the way, insurance companies handle these things every day. Don’t feel bad about switching companies. After all, if they would have given you a better price or provided better service, then you wouldn’t be cancelling.
Get A Refund on Your Car Insurance Premium
Since auto insurance policies are six or twelve month contracts, you might be switching policies in the middle of the policy period. If you’ve prepaid for the policy either on a monthly, semi-annual, or annual basis, then they owe you some cash. When you’re on the phone with the old company, ask them about a “return on unearned premium”. That’s the money you’re owed for not finishing the contract. The good news is that most consumers have that money coming to them.
Don’t Drive Uninsured
Whatever you do, don’t drive uninsured. Make sure your new policy is in force before cancelling your old policy. It would be a shame to have an accident between policies. Don’t be a statistic – make sure you always have coverage if you’re driving a vehicle.
Was this article helpful? If so, leave a comment. If not, tell me what other consumers should know about cancelling their auto insurance.
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Reviews (11)
Chris
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There is some wring information here. You must cancel the policy on the same day your new one starts. A cancellation is effective at 12:01 AM, i.e. if you cancel your policy Feb 24th, and your new insurance starts Feb 25th, you will not have insurance for that 1 day.
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Brandon Clay
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Thanks for the clarification, Chris!
I updated the article.
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Raj
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Thanks for the article .. it is so helpful..
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Brandon Clay
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No problem, Raj!
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santosh
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what you guys are talking about can understand a thing….y u guys are so complecated….
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shang
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If I pay the issurance for every month, what happend if I cancel it in the middle of a month? Can I get a refund?
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Todd Clay
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Most (if not all) states require that you get your “unearned premium” back from the insurance company. So yes, you should get a refund for half the month if you cancel the policy effective mid-month.
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Tyler jones
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So my car brokedown so I’m selling it cheap, I’m supposed to pay insurance in about a week. Since I paid the first and last month up front does that mean I’d get the remaining balance back or could that just pay for this month?
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Todd Clay
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You should still pay this month, just to be safe. But they shouldn’t have your money for long. Insurance companies are obligated to return unearned premium back to their policyholders. If you sell your car that soon, it sounds like you’ll get a nice check back from your insurance company.
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brandon s
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If I obtain a new insurance policy on 2/25 and decide I want to cancel on 3/5 ( within 2 wks ) what portion of my down payment for coverage should be refunded to me ?
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Michele Griffin
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You should get back the portion that goes beyond those 10 or so days that you were covered.
To figure this out, divide your premium amount for that term by the number of days in your insurance term. This will give you an estimated “per day” cost of your insurance policy.
Next, divide the “per day” number by how many days you had insurance. Lastly, subtract the estimated cost of those days that you had insurance from the deposit that you paid. This should give you an estimate of how much you can look forward to getting back.
The only thing that would prevent a refund is if your insurance company has a mandatory down payment policy; one that is not refundable, even if you cancel your coverage. You insurance agent should have covered this with you when you first purchased your policy.
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