Find the Cheapest Insurance Quotes in Your Area
Most auto insurance companies allow you to cancel your coverage at any time during your policy's effective dates. Simply contact your insurance agent and ask them about their cancellation process. Typically, you'll be required to submit a signed cancellation letter in order to officially terminate your policy. Any unused premiums that you've prepaid to your insurer will be refunded. However, some companies may charge a small cancellation fee.
How to Cancel an Auto Insurance Policy
If you want to cancel your car insurance policy, the first step is to contact your insurance agent and ask about their cancellation requirements. Your insurance agent will ask why you wish to cancel your policy. Reasons you may want to cancel your car insurance policy may include:
- You are moving and/or purchasing a new vehicle
- You are selling, giving away or disposing of your car
- Your car has been totaled
- You are beginning an extended restoration of your vehicle
- You no longer plan to drive your vehicle (and don't want to maintain comprehensive coverage)
- You have experienced a life change, such as a marriage, and are changing policies
- You are dissatisfied with your current insurance provider
- You have compared quotes and found a better deal
Your insurance agent will likely offer you a discount or coverage alternatives in an effort to retain your business. Depending on your reasons for canceling your policy, their offer may be an attractive option. For example, if you've purchased a new car, you may simply choose to remove your old vehicle from your current policy and add the new one. Such a change may increase your rates, if your new vehicle is more expensive than your old one. But if your agent offers a discount, your new rate still might be better than the quotes you'd receive from other insurance companies. As always, comparing quotes from at least three different insurance providers will help you find the best cheap car insurance.
You should understand that your claims history follows you from one insurance company to another. When you apply for a car insurance policy, the insurer will run a CLUE Auto report that outlines your accident and claims history. So if you're canceling your policy because your claims history has caused your premiums to rise, you may be out of luck. Any new insurer will consider those same incidents when determining your rates.
If you choose to carry through with your policy cancellation, ask your insurance agent if you'll need to pay a policy cancellation fee and what paperwork you'll need to submit. Most insurers allow you to cancel without paying a fee, but some may charge about $50. If your agent asks you to submit a written request to cancel your policy, you'll need to send a signed cancellation letter. If you fail to submit this letter and simply stop paying your insurance premiums, your account may be marked for non-payment. This will damage your credit score, which could increase future auto insurance premiums in certain states. Additionally, a poor credit score could affect your ability to obtain a mortgage, credit card or small-business loan.
If you're switching insurance companies, your current agent may tell you that you'll need to submit the declaration page of your new insurance policy in order to cancel your current one. You are not required to do this. Your current agent is simply trying to determine the rates you're paying on your new policy. That way, they can offer you a lower quote in the future to regain your business.
Once you've submitted your cancellation letter, notify any lienholder that has a partial stake in the vehicle. If you're switching insurance companies, send your lienholder proof of your new policy as soon as your coverage starts. If you don't plan on obtaining coverage from a new insurance company, notify your state's division of motor vehicles (DMV). In some states, you may need to return your car's license plate.
How to Write a Car Insurance Cancellation Letter
If your insurance company sends you a preset form, fill it out and return it to your agent. If they simply request that you mail them a cancellation letter, you may write one yourself. Your cancellation letter should include:
- Your name
- Policy number
- A short message clearly stating that you wish to terminate your car insurance coverage
- The desired coverage end date
- A request for reimbursement of any unused, prepaid auto insurance premiums
- Your dated signature
The end date you select for your policy shouldn't be any earlier than the final day you need to drive your car. If the vehicle no longer functions, you can cancel your policy immediately. If you are selling your car and need to drive the vehicle in order to prove that it is in good working order, set your policy's end date as the date on which the transaction will take place—as long as you're confident the transaction will take place.
Car Insurance Cancellation Fees
You may always choose not to renew your coverage at the end of your policy's term for no fee. You also have the right to cancel your policy in the middle of your coverage term. Fortunately, many auto insurance companies allow you to do this without paying a cancellation fee—but others don't. Below are the general fees reported both by insurance companies and customers. However, fees can vary significantly based on your state, and some companies may also charge a hidden processing fee. Ask your agent to disclose all fees when initiating your cancellation.
|Esurance||10% of the remaining premium balance or a flat fee of $30–$50|
|Liberty Mutual||$0–$100; varies by state|
|Progressive||10% of the remaining premium balance; varies by state|
What to Do if Your Car Insurance Policy is Canceled
There are two ways your auto insurance company may terminate your coverage: nonrenewal and cancellation.
Nonrenewal occurs when your insurer chooses not to renew your policy after your contract expires. This form of policy termination is preferable, as it does not necessarily indicate irresponsibility on your part. For example, an insurance company may be withdrawing auto insurance coverage in your region. If your policy will be subject to nonrenewal, you'll receive a notice from your insurer in advance of your renewal date. This notification date varies by state, ranging from 120 days in advance in Alabama to 10 days in advance for drivers in Arizona.
If you receive a notice of nonrenewal, you should begin comparing quotes from other auto insurance companies and obtain a new policy effective as of the date following your current policy's termination date.
Cancellation could occur for a number of reasons:
- You've failed to pay your premiums
- Your license has been suspended
- You've been involved in an excessive number of moving violations or accidents
- You've committed insurance fraud
The policy cancellation process is similar to that of nonrenewal. You'll receive a written notice from your insurance provider. If the cancellation is due to a mistake, such as a check payment that was lost in the mail, you should contact your insurance agent immediately, explain the situation and try to get your insurance coverage reinstated.
However, if the cancellation is due to a driving infraction you've committed, such as a DUI, you'll likely have a hard time finding similar coverage from a major provider. Instead, you might have to pay significantly higher premiums for coverage, and your policy may also be subject to additional limitations. If you cannot find coverage from a major insurance company, you may need to turn to a company that specializes specifically in high-risk auto insurance, such as Victoria Insurance or Titan Insurance (a subsidiary of Nationwide).