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What Happens if I Cancel My Car Insurance?

Written by Todd Clay. Posted in Research Last Updated: 09/18/2010

Your right to cancel auto insurance, how to handle switching companies, and canceling when you no longer need coverage.

chinese businessman tearing up contract

Do you just tear up the policy when you don't want it anymore?

What happens when you cancel your car insurance?

It’s easy to cancel coverage. You can simply stop paying, but the cancellation is not instantaneous. When canceling insurance, it’s important to inform your insurance company of the exact date you want to cancel. Otherwise you may wind up paying for insurance you’re not using.

Your Right to Cancel Auto Insurance

Although some agents may try to imply otherwise, the fact is you have the right to cancel your auto insurance at any time for any reason…or for no reason at all. While changing companies at renewal can be an easier process for both you and the company, you do not have to wait until renewal to do so.

That said, there are a few things to consider if you rewrite your coverage.

First, your new insurance company will likely require a down payment to start your new policy. While there can be savings in the long-run changing companies, the upfront costs may result in a higher cost in the short-run. Be prepared for some additional charges when changing companies.

How to Handle Switching Companies

Secondly, ask your new insurance company to send a cancellation to your old company on your behalf. This prevents you from having to make that awkward call to the old company. A cancellation can be done with a simple note faxed to the old company from the new.

It can also be done with an “Acord Cancel” form. This is a standard industry form that most companies and agents are familiar with. Your new company will be happy to oblige, and your old company is required to honor the request. Agents much prefer sending cancellations than receiving them.

Getting a Refund

Also remember the chances of getting a refund back from your old company are pretty good. Most insurance companies design their payments so that you’re consistently paying for coverage not just for today but for a certain period into the future, generally around four to six weeks.

This is intended to keep your coverage from lapsing in the event of an inadvertent short or late payment. Further, insurance companies are required to refund any premium applied for unused time directly to you – called a “return of unearned premium.” As a result you may get a check back from them (or at least a smaller bill) a few weeks after you cancel.

When You Just Cancel Your Policy

For the very same reason, it is important to inform your insurance company if you’re canceling coverage due to selling a vehicle or otherwise not driving it anymore. Remember, it’s not illegal to own a car without insurance. Rather, it’s illegal to drive a car without insurance.

If you simply stop paying for insurance the coverage will eventually be canceled, but not until four to six weeks after the fact. Informing your insurance company of the exact date you’re not using a car anymore prevents you from paying for a month or more of needless coverage.

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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.

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Reviews (2)

  • car inadvertantly dropped from policy


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    I have always had 3 cars on policy. Two driver household. One car blew and when later replaced with a another second car my old pickup was dropped from policy. I did not realize. and have had an incident and it is uninsured! Is there any grounds to rely on the past?


    • Michele Wilmonen


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      Possibly, but it depends on the timing. If you just made the change that resulted in your truck being accidentally taken off your policy, you may be able to argue with your insurance company that they made an error that they need to fix.

      However, if this happened more than a month ago, a decent argument of getting it changed back is unlikely for two reasons. One, it falls upon you to check the insurance documents that the company sends to you to make sure that everything on your policy is listed correctly. Two, you have now had an accident with the truck.

      I would at least call and talk to them about the situation either way.


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