If you've ever wondered how to cancel your auto insurance, we can assist. The process is straightforward, but knowing when and how to discontinue your coverage is another story. You may also be asking if you can cancel your auto insurance and receive your money back. In some situations, you may be eligible for a refund, as described below.
What happens if you cancel your vehicle insurance policy?
There are various consequences to dropping your auto insurance. The most important thing to remember is that you will not have insurance coverage unless you obtain a new policy in a timely manner. This might result in fines and other penalties, as almost all states require a minimum car insurance coverage (New Hampshire being the exception). These penalties may include the suspension of your license and even jail time.
Lack of coverage exposes you to the costs of an accident if you are determined to be at fault. If you drive without insurance and cause an accident, you will have to pay for your own injuries and damages, which might be expensive after a catastrophic accident.
A gap in coverage may also make it more difficult for you to obtain a new policy if you decide to do so. If there is a difference between your old and new policies, you may forfeit discounts, such as loyalty discounts. And if you've been without insurance for a long time, certain carriers may consider you a higher risk, resulting in higher prices.
How to Cancel Your Auto Insurance
Understanding how to terminate your insurance policy is simple. Although each auto insurance company has its unique protocols, it should be very straightforward to contact the business and begin the process of terminating your coverage. Every state has restrictions governing when you should surrender your license plates (if you are not purchasing a new coverage)—whether before or after you cancel your current policy.
Here are some measures you should take to successfully cancel your coverage.
If you plan to drive again, you should purchase new coverage. This should be done before canceling the old policy to avoid a coverage lapse. A lapse could raise your insurance costs.
Communicate with your insurer. Contact your firm via email or snail mail, or phone your local agent to request that your insurance be canceled. Find out if there is a cancellation fee or if you will be refunded for unused premiums. There may also be other obligations, such as providing 30 days' notice.
Sign a cancelation letter, if necessary. Not all insurers require this step, but if it is, it will most likely include information on your insurance and the time remaining on it.
Request a policy cancellation notice. You may receive this automatically; however, if not, you can request it.
When Should You Cancel Your Auto Insurance
For drivers switching carriers, it is a good idea to get a new coverage before your existing policy expires. If you're making a permanent cancellation, consult with an insurance agent to ensure that lacking coverage won't place you in legal or financial trouble.
Whenever you move
If you relocate to another state where your existing insurance provider does not provide coverage, you must obtain a policy from an auto insurer in your location. To avoid a lapse in coverage, arrange for the new policy a few weeks before your current one expires. Some jurisdictions, such as New York, require drivers to surrender their license plates before canceling their automobile insurance, even if they are moving out of state. In certain cases, you may need to carry a few days of overlapping insurance to avoid state fines.
When you don't own a car
When you sell a vehicle and have no plans to replace it, you can cancel your auto insurance. However, it is normally a good idea to wait until the new owner takes possession and transfers the title before stopping coverage. Check with your local DMV to determine if you are responsible for returning your license plates or if they will remain with the new owner. If you intend to purchase a new automobile within a few months of selling your current one, you should speak with an agent about converting your insurance to a non-owner policy. This may help you avoid an insurance lapse, keep the policy discounts you've earned with the provider over time, and avoid a rate hike.
When you want a better offer.
You may decide to switch vehicle insurance companies to get a better cost. Again, it is usually a good idea to get a new policy before discontinuing your present coverage. The simplest method to avoid a lapse in coverage is to have the start date of your new insurance match the scheduled cancellation date of the old policy. Experts recommend shopping for a new insurance carrier at least six to eight weeks before your current policy expires.
When you wish to limit coverage.
If you own an older vehicle outright, you may want to consider eliminating optional collision and comprehensive coverage. However, you should consider the hazards ahead of time. It is crucial to know that if you quit collision and comprehensive coverage, you will most likely have to pay out of pocket if your vehicle is destroyed or stolen, so be financially prepared. This would be deemed a policy change rather than a policy termination.
When you're protected by someone else's policies
You may choose to cancel your insurance if you live in a household where another individual has coverage and you can be added to their policy. This is most likely to be the case if you marry, although it could also apply to adult children returning home. Adding a driver to an existing insurance may raise your premiums, but there may be reductions available to assist offset the increase.
Keep in mind that insurance follows the vehicle, not the person, so if you cancel your policy and lose coverage for your car, you must add it to the other person's policy to assure financial coverage. Thankfully, multi-vehicle policies frequently produce in discounts.
When You Should Not Cancel Your Auto Insurance
While you have the option to cancel your auto insurance at any moment, you may not need to. Before canceling your coverage, you should consider why you no longer need it and devise a strategy to avoid potential legal or premium-related concerns.
When will you be driving?
Canceling coverage on a vehicle you still intend to drive is not a good idea because it may put you financially at risk and violate state regulations. Speak with a professional insurance agent to learn more about how driving without insurance may effect you.
Whenever you move
Moving does not obligate you to obtain a new auto coverage. Before you move, call your current auto insurance to see whether you can transfer your coverage to the new state. Moving can cause your rate to alter because geography influences premiums. If your existing insurance company has local offices, you may need to interact with a new agent as well.
When you marry or divorce
Getting married or divorced frequently signals that policy revisions and modifications are required. You can add a new spouse to your existing auto policy and may even receive a discount for getting married. You may also be eligible for a multi-policy discount if you and your new spouse have insurance with the same company. If you divorce, you can usually remove your ex-spouse's name from your existing policy rather than canceling it completely.
When you are just temporarily not driving.
If you want to take an extended break from driving, several car insurance providers will enable you to stop your insurance and place your vehicle in storage. Some states require you to submit a written request to suspend or cancel your license plates, whereas others allow you to just call your agent. If you cancel your insurance policy rather than suspending it, your insurance company will most likely see this as a lapse in coverage, and your insurance premiums may rise when you acquire a new policy.
When your premium is higher
A high premium does not always indicate you should discontinue your coverage. Most auto insurers provide several forms of discounts. You may be eligible for a discount if you drive cautiously, complete a virtual driving course, or report your vehicle's safety equipment, such as airbags or anti-lock brakes. Contact your agent to see how discounts can cut your rates and which ones you may be eligible for but are not currently taking advantage of.
Will I get a refund if I cancel my auto insurance?
If you pay your premium in advance and then cancel your policy before the end of the term, the insurance provider may return the remaining sum. Most vehicle insurers will prorate your return based on the number of days your existing policy was active.
The insurance sector is heavily regulated, and each state has insurance legislation that dictate how companies must handle returns. In Nebraska, for example, your auto insurer must contact you within 15 business days of cancellation to notify you of any qualifying refunds. In many states, including Texas, if you finance your premium with a premium finance firm, the insurance company may refund the unused premium to the finance company rather than you.
Unless otherwise indicated in a statute, auto insurance providers are usually not required to return your money within a certain time period. To avoid refund issues, notify your auto insurer of your intent to cancel when it is almost time to renew. Before canceling, check with your carrier to learn more about their insurance cancellation policies.
Car insurance cancellation fees
Depending on the auto insurance company, canceling your coverage before the end of its term may incur a cancellation fee. State legislation can decide whether a fee is permissible. If so, it is up to the insurer to determine the cost, which is frequently deducted from the prorated refund.
Cancellation costs can be either flat fees or short-rate fees. With short-rate cancellations, the insurer will charge the policyholder a percentage of the unearned premium, which is normally 10%. This sum will be deducted from the remaining refund, or the policyholder will be billed if there is no return owed.
What happens if I just stop making my insurance payments?
If you choose to stop your coverage, you should contact your insurer or agent. If you stop paying insurance premiums but don't cancel your coverage, your carrier will eventually cancel it due to nonpayment. However, insurance coverage may be charged up to that point, as well as late fees.
Failure to properly tell your insurer that you wish to cancel may jeopardize your ability to obtain auto coverage in the future. Even if you intend to locate a new auto insurance company, skipping payments may result in a poor payment history, making it more difficult to obtain inexpensive rates. Similarly, if you have automatic bank account withdrawal set up to pay your premiums, you may continue to pay for coverage you do not want to keep.
Informing your insurance company of your plan to cancel, as well as providing a precise cancellation date, helps the insurer to follow the required cancellation processes, such as informing the DMV on your behalf and initiating the refund process.
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