Canceling your car insurance policy is an easy process, and usually just involves a quick call to your insurer. But there are some factors to consider before you dump your current provider: While you can cancel your car insurance at any time, if you’re switching insurance providers, make sure to set up your next policy before you cancel your current one.
And if you’re canceling because you’ll no longer have a car, make sure you have insurance all the way up until you sign the title over to the new owner. You’ll get your money back for your pre-paid premiums, but you may have to pay a fee as well.
Don’t worry, canceling your car insurance won’t hurt your credit score. But if you cancel your car insurance while you still have a car, future insurers will see that you had a lapse in coverage, which can raise your rates. Let’s take a look at how to cancel your car insurance, and when you should and shouldn’t consider ditching your coverage.
How to cancel your car insurance
Canceling your car insurance policy is simple enough. For most drivers, the process of canceling a car insurance policy looks like this:
Call your insurer
Ask about the cancellation process
Sign and send the cancellation letter, if required
Get a notice of your policy cancellation
Different insurance companies have different rules about how exactly you’ll need to go about canceling your policy. Let’s take a closer look at what’s involved in each step.
1. Call your insurer.
The number will be on your insurance card, in your policy, or online. Companies that have apps, like GEICO, Progressive, State Farm, or Nationwide likely have an option to contact the company within the mobile app.
2. Ask about the cancellation process.
Always make sure you understand the fine print before you cancel your insurance policy. Some insurance companies have special requirements when cancelling a policy, including:
Cancellation fees: Many car insurance companies do not charge cancellation fees, but some charge a fee of $50, or something called a “short rate” fee, which is 10% of the remaining premium you’d agreed to pay for the policy period. (If you had signed up for a six-month policy and canceled after three, you’d owe 10% of the premium you would have paid for the next three months)
Cancellation letter: Some companies require a signed cancellation letter. Ask your carrier for the format and the address or fax number you mail it to
Notice period: Some companies will let you cancel immediately (which you only want to do if you have new coverage starting right away), while others require 30 days notice
3. Sign and send the cancellation letter, if required.
This step is only necessary if your insurance provider requires a cancellation letter. Remember, if you’re switching car insurance companies, ensure that you have new coverage lined up that starts on or before your end-of-coverage date. You should set it so your old policy terminates on the same day that your new policy begins.
4. Get a notice of your policy cancellation.
This means your policy is officially canceled. This is also when you’ll get a refund of any pre-paid premiums, excluding any required fees.
What happens if you just stop paying your car insurance premiums?
If you stop paying for your car insurance, it will get canceled, but we don’t recommend this as a method for canceling your policy.
For one thing, your car insurance company won’t know your intention is to cancel, so they’ll request payments up through your grace period (the period of time that you’re given to pay your unpaid premiums before the insurer cancels your policy). Once your account is closed, you’ll be charged through that grace period, which generally lasts a few weeks.
There is one exception: If you have a policy that doesn’t renew automatically, you can stop paying at the end of the term without repercussions.
Can you cancel your insurance policy at any time?
You can cancel your car insurance whenever you’d like, and you’ll be refunded any “unused” premiums. However, as mentioned, if you decide to cancel via non-payment, you may be charged through the grace period.
If you’re switching car insurance companies, it’s essential that at least one day overlaps between the end date of your old policy and the start date of the new one.
Since policies generally start and end at 12:01 a.m., if you end one policy on Monday and start the new one on Tuesday, you would be without coverage from 12:01 a.m. Monday morning until 12:01 a.m. Tuesday morning, leaving you uninsured for a full day.
Anything can happen in a day, so make sure not to leave a gap in between policies. If you’re caught driving without insurance you could face serious consequences, and if your car is damaged in an accident, you’ll have to pay for the repairs out of pocket.
The same rule applies if you’re canceling your insurance because you’re getting rid of your car. Have the insurance end the day after the last day you plan to drive the car.
When is canceling your car insurance a good idea?
Really the only times you’ll want to cancel your car insurance is if you’re switching policies or if you’re getting rid of your car. But sometimes, even drivers who don’t own cars themselves still need a car insurance policy.
If you’re planning on renting or borrowing cars frequently, you may want to look into non-owner car insurance.
When is canceling your car insurance a bad idea?
Sometimes people want to cancel their car insurance because they think they no longer need their policy. But if you want to drop insurance while still keeping your car, you should reconsider. Here are some circumstances where you wouldn’t want to cancel your car insurance policy:
1. Canceling car insurance because you’re moving to a state that doesn’t require car insurance.
Most states have car insurance requirements. There are only two states in the U.S. that don’t require car insurance: Virginia and New Hampshire. If you move to one of these states, it may be tempting to cancel your insurance policy. But just because the state doesn’t require it doesn’t make it any less important, especially if you’re on the hook for somebody else’s hospital or repair shop bills.
2. Canceling car insurance because you barely drive.
Even if you rarely get behind the wheel, you need insurance: not only is it the law in almost every state — it’s also an essential form of financial protection. If you rarely drive, you may qualify for certain discounts on your car insurance. Be sure to talk to your insurance company and check.
3. Canceling car insurance because your car is in storage.
If your car is in storage for a long period of time because you’re on a long trip or a military deployment, it may be tempting to cancel your car insurance, but you should still keep the policy. For one thing, if your car is registered, it still needs insurance even if you’re not driving it. And even when your car is in storage, you should still protect it in case of damage from fire, falling objects or extreme weather. Consider dropping your coverage down to just comprehensive coverage instead of ditching your policy altogether.
It’s also important to maintain car insurance coverage so you don’t have a lapse in your insurance history. If you drop your coverage because you’re out of the country or you don’t drive very much, insurers may notice a gap in your past coverage history when you go to apply for coverage again. That can raise your premiums and cost you money.
Switching car insurance
Finding a policy better suited for you — maybe it’s cheaper, or you’re switching to share a policy with a spouse, or you want to bundle it with other insurance products — is a perfectly good reason to cancel your current car insurance.
But before you go quote shopping, know that there may be an even easier way to get lower rates: Ask your current insurer. Some car insurance companies may be open to revisiting your rates, so that should be your first step. If that’s not an option, then consider shopping around for car insurance.
If you find a cheaper car insurance quote and you purchase a new policy, take note of the start date. Then, call your old insurance company to cancel your policy, and don’t forget to make sure the policies end and begin on the same day.