Most providers allow policyholders to cancel insurance at any time. However, some policies carry early cancellation penalties. In this article, we at the MarketWatch Guides team detail when to cancel your insurance policy, what you can expect and how to find the best car insurance for your needs.
Key Takeaways
- Drivers can cancel their insurance policies at any time but should plan for potential penalties or insurance gaps.
- Many companies provide a prorated refund for policyholders who cancel before the end of their policy term.
- Understanding your policy and comparing quotes from new providers as needed can help simplify the transition between car insurance policies.
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How Soon Can I Cancel My Car Insurance?
Policyholders have the right to cancel their car insurance policies at any time. This means you can request cancellation from your provider as soon as the policy goes into effect or at any point before your renewal date. However, some providers may have restrictions or early insurance cancellation penalties built into their policies.
To avoid these penalties, consult your contract and discuss your options with your current insurer before canceling your car insurance policy.
Reasons Drivers Cancel Their Car Insurance Plan
Policyholders may decide to cancel their car insurance policies for several reasons, including:
- Changes to their driving record or credit score
- Finding better rates or more comprehensive services elsewhere
- Feeling dissatisfied with their current provider’s service
- Moving to a new city or state
- Diversifying their insurance portfolios, including adding homeowner’s insurance, renter’s insurance or life insurance
- Selling or trading in their car
- Traveling or pending car storage
What Happens When You Cancel Your Car Insurance
Your insurance provider will either immediately cancel your policy or impose a waiting period before the cancellation becomes effective. If you need to cancel your current coverage because you’re selling your car, your insurance provider may require proof of sale or other documentation to prove you won’t drive uninsured.
Canceling your policy before your renewal date may trigger early cancellation fees. Depending on your provider and other factors, you may be charged either a flat or short-rate fee.
Flat fees are static and do not change regardless of cancellation terms. Short-rate fees allow providers to withhold a prorated amount of your premium plus any additional amount they deem appropriate for risk management. Short-rate fees also decrease the closer you are to your policy renewal date.
Factors To Consider Before You Cancel Your Car Insurance
While you can cancel your car insurance policy at any time, there are a few things to think about first.
Cancellation Penalties
Some providers may require a 30-day notice to avoid early policy cancellation penalties. Check your auto insurance policy or speak to your insurance agent beforehand to prepare for any issues that may arise.
Lapse Penalties
Most states require drivers to maintain a minimum of liability car insurance coverage. For this reason, drivers without car insurance can incur fines, invalidate their vehicle registration, receive criminal charges and even lose their license. Ensure you have a new policy set up before you cancel your old insurance if you plan to continue driving your car.
Transportation Needs
Even if you only drive occasionally, you’re still legally required to have insurance, depending on your state. If you’re considering canceling your policy because you don’t drive frequently, choosing usage-based car insurance instead may save you money without risking legal transportation.
Budget
When shopping for coverage, it’s a good idea to get insurance quotes from several providers before committing to a new policy. New car insurance policies may come with down payment requirements and other fees that increase your policy startup costs. Factor these costs into your budget to ensure a smooth transition from your old policy.
How To Cancel Your Car Insurance Policy
Here’s how to cancel your insurance policy without issue:
- Determine your future insurance needs, if any.
- Check your current policy for any restrictions or penalties.
- Decide when you want your current policy to cease.
- Shop for new car insurance coverage, if needed.
- Speak with your insurance agent.
- Submit your cancellation request.
- Pay any applicable fees.
Information You’ll Need To Cancel Your Car Insurance
You may need to gather information before speaking with your insurance agent or shopping for quotes. Information you may need to provide during these discussions includes:
- Policyholder name
- Street address or mailing address
- Phone number
- Social Security number
- Date of birth
- Vehicle make, model and year
- Driver’s license number
- Car insurance policy number
- Desired cancellation effective date
Mistakes To Avoid When Canceling Your Car Insurance
To ensure a smooth cancellation process, avoid these mistakes:
- Failing to check your provider’s cancellation policy
- Allowing insurance to lapse on an in-use vehicle
- Driving without a valid insurance policy
- Not comparing quotes for a new insurance policy if needed
- Not notifying your provider that you’re canceling your policy
If you want to cancel your policy and find one that better suits your needs or budget, ensure you have a new one lined up before you cancel so you avoid an insurance lapse. Insurance lapses could cause your rates to go up with your next provider. They’re also illegal if you drive your uninsured car during a lapse, which could incur high penalties from fines to jail time depending on the state you live in.
Once you’ve gathered your necessary information and documents, determine how much coverage you need before comparing at least three or more providers. It helps to know whether you’ll need liability or full coverage, a six-month or 12-month policy, gap coverage or something else.
Keep reading: How To Shop for Car Insurance
Can You Cancel Insurance at Any Time? The Bottom Line
Policyholders may cancel their car insurance policies at any time and for any reason, from selling their car to needing more affordable coverage. However, depending on your provider and transportation needs, you may need to prepare for penalties or get a new policy to avoid an insurance lapse.
Top Auto Insurance Recommendations
If you’re looking for new coverage, you may find significant savings by comparing quotes from top providers. Our team recommends reviewing State Farm and Progressive in your search for insurance.
State Farm: Best Customer Experience
State Farm offers excellent customer service. The company also has an extensive lineup of insurance products with some of the most affordable rates in the country. Customers can choose from several levels of insurance coverage, from comprehensive and collision to non-owners insurance.
Keep reading: State Farm insurance review
Progressive: Best for Tech-Savvy Drivers
Progressive has excellent reviews on its application, Progressive Snapshot®, which is why we’ve rated the company Best for Tech-Savvy Drivers. Progressive is also known for providing affordable rates to drivers with accidents, speeding tickets and other violations. The company offers varying levels of coverage and policies tailored to fit any budget or term needs.
Keep reading: Progressive insurance review
Compare: Progressive vs. State Farm
Can You Cancel Insurance at Any Time? FAQ
Below are frequently asked questions about when you can cancel your car insurance.
Most providers allow policyholders to cancel their policies at any time. However, some may impose a waiting period before the cancellation goes into effect. This period could be as long as 30 days or more and is intended to prevent insurance gaps for drivers and loss of premiums for insurance companies.
Policyholders can often cancel their insurance policies online or via phone call. While canceling your car insurance is usually easy, drivers should carefully weigh factors like their budget, insurance needs and policy restrictions before initiating the process.
Generally, policyholders receive a prorated refund of unused premium payments remaining after the cancellation date. However, providers may also leverage fees or impose a cancellation wait time. Drivers’ insurance may also lapse, resulting in fines or loss of license.
Our Methodology
Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.
Here are the factors our ratings take into account:
- Cost: Auto insurance rate estimates generated by Quadrant Information Services and discount opportunities were both taken into consideration.
- Coverage: Companies that offer a variety of choices for insurance coverage are more likely to meet consumer needs.
- Reputation and experience: Our research team considered market share, ratings from industry experts and years in business when giving this score.
- Availability: Auto insurance companies with greater state availability and few eligibility requirements scored highest in this category.
- Customer experience: This score is based on volume of complaints reported by the NAIC and customer satisfaction ratings reported by J.D. Power. We also considered the responsiveness, friendliness and helpfulness of each insurance company’s customer service team based on our own shopper analysis.
Our credentials:
- 800 hours researched
- 45 companies reviewed
- 8,500+ consumers surveyed
*Data accurate at time of publication.
If you have feedback or questions about this article, please email the MarketWatch Guides team at [email protected].
