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Cancel Your Car Insurance and Get a Refund

Written by Todd Clay. Posted in Research Last Updated: 08/17/2012

When switching policies, why you should cancel your auto insurance and what happens if you don’t.

Cancelling your car insurance the right way.

Cancelling your car insurance the right way.

If you’ve switched auto insurance policies, it’s time to cancel your old car insurance policy. 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.

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.

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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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Todd Clay

Todd Clay is a former insurance agent with the largest insurance company in the United States. He earned his Bachelor’s from the University of Texas. He's worked in several fields but has specialized in insurance, financial-related information, and technology. He blogs at Car Insurance Guidebook. Connect with Tood on Google+

Reviews (34)

  • gloria smith

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    GEICO cancelled my policy,I’m paid up and turned in plates and everything.I had 4 cars insured,I’m I entitled to refund?

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    • Michele Wilmonen

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      Yes, if you were paid in full and your policy cancelled before the end of your term you are entitled to a refund.

      Reply

  • Fernando

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    Hello i just got insurance for my first time two days ago which i was to pay monthly and i soon found another insurance company through a family member and is reasonably cheaper with equal coverage,i had given the insurance company $153 on the spot for the policy and wanted to know if i can be entitled to a refund?

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    • Michele Wilmonen

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      Most likely you are entitled to a refund. You need to make sure that your old policy is cancelled effective the day your new policy started. Then once the old policy is cancelled that company will tell you if you are owed a refund for the days of insurance that you paid for and ended up not needing.

      Reply

      • James

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        No, I already knew this, I am trying to get a rebate from a company that i was with 14 years and never filed a claim, and I want to get some of the 14 years of premiums for my homeowners insurance rebated because of the poor service.

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        • Michele Wilmonen

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          Hi James,

          Sorry to hear about the poor service. Unfortunately, insurance companies don’t base their business off whether or not they provided good customer service or not, they base it off providing a service. In other words, you were paying them for 14 years of protection in the event a claim would have happened.

          I know that you never had to file a claim, but if you had they would of had to pay for it.

          You could try filing a complaint with your state’s Insurance Commissioner or Insurance Department, but to be honest with you, they are going to side with the insurance company in this case. Really the only thing that you can do is move your business to another company and tell your experience with this insurance company to friends, family, and through insurance company review sites.

          Reply

  • Elaina

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    I paid 320.00 down as a deposit because ive never had insurance and im only 18 so the company which i used (progressive)didn’t have any thing to go off of paid the 320 on march 22nd and then my first month was due on april 11th which i paid i am canceling my policy tommorrow which is april 22nd should progressive refund me money

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    • Michele Wilmonen

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      If you paid a month in advance, you should get a refund for any future insurance coverage you paid for but did not use. You would need to contact the insurance company for the amount and if they charge any cancellation fees.

      Reply

  • Harry

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    I’m switching policies mid-term from AAA to Geico for a better rate, I think I may switch just before completion of 6 months with my current insurer. Is there typically a cancellation charge that my current insurer may charge me? If yes, how much do they normally charge? Im a resident of Maryland.

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    • Michele Wilmonen

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      Cancellation fees vary from one insurance company to the next, and many do not charge any at all. You would have to check with your specific carrier.

      Reply

  • Melissa

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    Ok I will do that. Thanks :)

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  • Melissa w

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    If I pay 140 a month & I paid it on the 28th & switch companies on the 12th am I owed a refund or do I owe my old company?

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    • Michele Wilmonen

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      Hi Melissa,

      Honestly, I can’t answer your question. What I can tell you is that you need to contact your insurance company and ask them for a breakdown of your billing. You need to know exactly to what date you were paid through before cancelling your policy.

      For example, if you were paying month to month, more than likely you were paid a month ahead. So if your monthly coverage started on the 28th of the month that you first started your insurance with your old policy, than most likely you are owed money back. Because you were paying for coverage from the 28th of one month to the 27th of the next month.

      However, you need to talk to your old agent or insurance company to find out the details of what you were paying for each month.

      Reply

  • rose

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    i cancelled my insurance policy because i moved out of state. I put 193.00 deposit down on my insurance. I got a refund of 26.18. Nothing was stated about the deposit being non-refundable at the time of purchase. I called the insurance company, and requested a statement of charges as to why, but they are giving me a hard time. I looked through the contract, and i see nothing about the deposit being nonrefundable. I only had the insurance for 3 months, and a 90.00 rate per month. Im not sure what to do.

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    • Michele Wilmonen

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      That down payment you make on your insurance policy is usually to pay for the first two month of insurance. So usually you are paid ahead, unless you missed a monthly payment.

      If the insurance company is refusing to give you a breakdown of what coverage you actually paid for, you need to contact the Insurance Commissioner of the state you had the policy in. Tell them that your old insurance company is refusing to give you a refund for coverage you didn’t have, and that they refuse to give you a breakdown of how your premium was applied to the coverage that you did have.

      Reply

  • A

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    Hi. I paid my monthly premium on July 5th. I cancelled and switched companies on July 11th. My monthly premium was $66.50. I was refunded $22.50. I called because I expected most of my premium to be refunded. They told me they calculate it differently and I was refunded what I was owed. How can that be after 6 days?

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    • Michele Wilmonen

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      This actually happens a lot. What happens is that your billing date and your coverage dates don’t line up exactly sometimes.

      For example: Say your insurance coverage starts on the 1st of the month. So, your coverage dates run from the 1st to the 30th. But, you may not pay your insurance on the 1st, say it is due on the 5th (for some reason). The bill you are actually paying on the 5th is paying for coverage from the 1st to the 30th, not the 5th of the current month to the 5th of the next month.

      What you need to do is contact your insurance company and request that they give you a breakdown of your billing. You want to know the time period that each payment you made covers and you also want to know how much you are paying for insurance each day (pro-rated).

      If they refuse to comply, contact your Insurance Commssioner and report that your insurance company is not refunding you the unused premium you are owed and that they will not provide a breakdown of exactly what insurance coverage you paid for.

      Reply

  • Carmela

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    I cancelled a motorcycle policy after paying for a full year and used it for two months before an accident that totaled the bike. The claim was paid quickly, and coverage was suspended for a few weeks while I didn’t have a motorcycle. I then replaced the bike but got a better deal at a new insurance company. My agent said I would get a refund in 2 weeks however its 6 weeks and still no money. I did get a letter confirming cancellation and stating amount to be refunded was just under $1500. Can the insurance company be sued for not returning the unearned premium timely if I ever do get it? I have bills to pay and I was told 2 weeks for the refund so I was counting on having that money. What can I do? Thanks!

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    • Michele Wilmonen

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      As far as I know, you cannot sue the insurance company in this case. You can call them to find out where the check is, but because they have to rely on the postal service to deliver checks, it could have easily got lost in the mail.

      If they said that they mailed it over a month ago, request that they issue you a new check. When you are doing this, confirm with them that they have your address correct before it is mailed out again.

      Reply

  • tory

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    Hi,
    I had auto insurance in which the company cancelled my policy due to me not paying the premium. I was on a semi annual plan. They canceled my policy on 05/10/12 in which i received new coverage from a different company the same day 05/10/12. Am i entitled for a return on unearned premium.

    Thanks

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    • Michele Wilmonen

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      Hello, Tory.

      You would need to contact your insurance company to find out if you are entitled to a refund. First, ask them what day your policy was paid up to and if it is a date after 5/10/12 you are entitled to a refund. They may want to see proof that you had car insurance established with another company, but once they have proof they have to send you a refund.

      Good Luck.

      Reply

  • ronda

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    i canceld my insurance early and there trying to make me pay a fee should i still get a refund check

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    • Michele Griffin

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      Hi Ronda,

      I would go back through the paperwork that you first got when you signed up for the insurance. Some insurance companies do indeed charge an “early cancellation fee”. If there is nothing in the paperwork about an early cancellation fee, I would find out if the amount they are trying to charge you is for insurance coverage that they provided for you that was not paid for yet.

      If they cannot give you a sufficient answer as to why they are not refunding your money and are trying to charge you more, it is time to contact your Insurance Commissioner.

      Reply

  • 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.

      Reply

  • 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?

    Reply

    • 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.

      Reply

  • 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.

      Reply

  • 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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  • Brandon Clay

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    No problem, Raj!

    Reply

  • Raj

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    Thanks for the article .. it is so helpful..

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  • Brandon Clay

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    Thanks for the clarification, Chris!
    I updated the article.

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  • 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.

    Reply

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