You have the discretion to cancel your auto insurance at any time and for any reason. Perhaps you simply don’t like your current insurer, or they are charging higher premiums, and you found a better deal somewhere else. Tough financial times may require tough choices such as canceling your car insurance to save on costs and receive a refund if you prepaid the premiums in full. Maybe you’re selling or giving up your car, and if so you need to ensure that the insurance is still in effect until the title changes hands. Here is everything you need to know when canceling auto insurance:

Steps on how to cancel auto insurance

Canceling your auto insurance should be done systematically and with a lot of consideration. So, the first step may not be so obvious, but it is vital.

Step 1: Start shopping for  new car insurance 

Consider shopping for a new insurer before canceling your current policy. When you identify a company with fair rates, you may contact their team and inform them that you intend to switch to their plan. Some brokers are more than willing to help you during the transition. You will need to furnish them with the insurance details, and they will guide you during the cancellation process.

Step 2: Go over your policy document  or check the insurer website for more information on policy cancellation 

The most important information to check is the Notice Period that the company affords you to cancel the insurance policy. For some, it is 30 days,  while other companies may support immediate cancellations.

Step 3:  Contact the insurer 

The next step is to contact the insurance company and inform them of your intention to cancel the car insurance. Insurance companies may offer the option to cancel the policy from their website, but you may get a faster response by calling them up.

They will review the policy and the payment history to determine if there is a refund to issue or if you have outstanding payments. Canceling should not take you a long time.  Some companies will ask you to submit in writing your intention. In most cases, you’ll just have to write an email.

As an extra step, confirm that you don’t have any outgoing payments to the insurance company that may be enabled due to auto-pay.  If so, you can call your bank and inform them to pause any pending payments to the insurance company.

Step 4:  Ensure that there is no lapse of cover 

Work with the new insurance company to ensure that the new coverage starts at the appropriate time. The new and old covers may overlap by one day or some hours for added caution.

How to cancel car insurance without charges 

There will be a car insurance cancellation fee for canceling mid-policy, but not all insurance companies charge it.  So, if you’re wondering if you’re going to pay a fee,  just contact your insurance company and ask if they have cancellation fees.

It may be a fixed fee, for instance, $50, or they may calculate the cancellation fee you have to pay using the short rate formula. It’s a variable fee that depends on the time the policy was in effect and the total cost of the premiums.

Canceling earlier in the year tends to result in a higher short rate fee while ending your cover near the end of your policy attracts a lower fee. Once the auto cancellation fee is deducted from the outstanding premiums,  the insurance company will issue a refund. The reason for charging a cancellation fee is to enable them to recover the administration costs incurred when setting up the policy.

So, if you want to cancel your car insurance without charges consider canceling it at the renewal date but always ensure that there is no lapse of coverage.

What you can do instead of canceling your car insurance 

  • Reduce add-ons to cut costs 

If you want to halt your car insurance because you want to save on costs,  you may consider reducing their coverage to the requisite necessities. You may have up to $1 million in third-party liability coverage. You can reduce the coverage to the bare minimum of $200,000 and reduce your premiums. However, this comes with its own set of challenges.

  • Consider looking for a cheaper alternative elsewhere

Do you feel that you’re paying too much for your car insurance? Well, consider shopping around for a more favorable provider with better terms and discounts. Sorting through websites to find the best insurance company may be tiresome and unproductive. Often the best leads may be found by using insurance brokerages. Several sites offer these services, such as Surex.

Can I cancel the insurance on a financed car? 

The loan provider will not allow you to cancel the insurance on a financed car. In most cases, they require car owners to take full coverage, which entails obtaining comprehensive and collision car insurance.

There might be consequences for halting the insurance, including repossessing the car. The lender will also be listed as the lienholder, and so they will receive a notification of the cancellation. Getting the car back will involve added costs and may hurt your credit score.

Bottom Line

Many companies don’t charge an auto insurance cancellation fee, and if so, it may not take up a significant portion of your outstanding premium. When reducing your insurance coverage, know which kinds of risks you’re taking on. While the best time to cancel maybe during renewal, it’s not always prudent to wait when you have a better deal somewhere else.