Can I Cancel Car Insurance? – What You Need To Know

People frequently asked; Can I Cancel Car Insurance? Here is everything you need to know about cancelling your car insurance, car insurance cancellation charges, and the all-important 14-day cooling off period.

If you find a better deal with another car insurance company or are selling your car, you can cancel your car insurance policy to take advantage of insurance savings. However, avoid surprise cancellation fees by checking your insurer’s cancellation policy, and consider the cost benefit of switching companies if your current insurer does charge a fee.

Can I Cancel Car Insurance? Why you may need to cancel your car insurance

Buying car insurance is not just a huge expense, but a big commitment, lasting 12 months, or longer if you have decided to auto renew. 

But things change: 

  • Maybe you found a cheaper car insurance deal elsewhere
  • You want to sell your car
  • You don’t want to be tied down to your old car insurance policy 
  • Maybe you’ve shopped around and realised another insurer can give you a better deal
  • Or you’ve made a claim on your insurance, and you are now worried that the insurer won’t let you cancel the policy

Is it worth cancelling my car insurance policy?

If you only have a few weeks or a couple of months left on an annual policy and you are looking to swap to a cheaper insurer, then you should read the cancellation conditions and see if the savings of your new deal outweigh the costs of cancelling your current car insurance policy.

Can I Cancel Car Insurance?

Yes. If you want to cancel your car insurance, an insurer can’t say no. But they can make it difficult to cancel by making you call or charging a fee for ending you policy early. Calling is usually the easiest way to find out about the best process and avoid fees.

How to write a car insurance cancellation letter

If you have new insurance lined up, your new insurer may give you a template letter, often called a cancellation letter or cancel previous insurance letter. If your new company doesn’t have a boilerplate cancellation letter, include this information in your letter to your old insurer.

  • Name
  • Address
  • Current policy number
  • Note that you would like to cancel your policy
  • Reason for canceling
  • Policy end date
  • Request for prorated premium reimbursement, if applicable
  • Signature and date

Can I Cancel Car Insurance? What to consider before canceling your car insurance

While canceling car insurance is easy, it may put you in a high-risk pool if you don’t have a new policy lined up. Being considered a high-risk driver means you’ll pay higher rates in the future. Before canceling your car insurance entirely, consider the effects of:

  • Offsetting the cancellation fees. Let’s say you’re switching from GMAC to Geico. If GMAC charges you $30 to cancel but you’ll save $10 a month by switching to Geico, it’s probably worth the fee to switch your policy now, rather than wait for your renewal period.
  • Stopping payment. If you simply stop paying your premium, you could be tagged with cancellation fees, lose the good payer discount with your new insurer and even lower your credit score. A lower credit score can affect your premium with your new insurer until you raise your score again.
  • Getting in a car accident with an at-fault driver. If the other driver is at fault and you don’t have car insurance, you could file a claim with the other driver’s insurer. However, no-pay, no-play states like California or Missouri limit you from suing for certain types of damages, like physical pain.
  • Legal penalties. Even if you aren’t in a car accident, if you’re caught driving without car insurance in a state that requires a minimum level of car insurance, you could face serious penalties, such as license suspension or revocation, fines and even jail time. In some states, if you’re ticketed for driving without car insurance, you may be required to file an SR-22, which means paying more for your policy.
  • Getting marked as a high-risk driver. A gap in coverage on your record qualifies you as a high-risk driver, and this means you’ll likely pay higher rates when you purchase car insurance again.

Will I pay a cancellation fee?

You usually won’t pay a cancellation fee when canceling your car insurance, but it depends on the insurer. If there is a cancellation fee it can vary from $25 to $50 up to a percentage of the remaining premiums left.

Most companies that charge a fee bill you for $50 or 10% of your remaining premium if you need to cancel before your renewal. You can skip the fees by waiting to cancel until renewal time.

Car insurance cancellation fees

Company NameCancellation fee
AAA$0
Allstate$0
American Family$0
Farmers$0
Geico$0
Liberty Mutual$0
Mercury10% of remaining premium
Nationwide$0
Safeco$0
State Farm$0
The General10% of remaining premium
The Hartford$0
Travelers$0
USAA$0

How Do I cancel my car insurance?

In many cases, you can cancel your car insurance in just a few minutes with a phone call or written notice of your cancellation. But be ready with your next steps, like having another insurance policy in place before canceling.

  1. Contact your insurance company. Let your current insurer know that you want to cancel, or your new insurer may help you cancel if you’re switching companies. Be prepared with the date you want your insurance to end and the reason for canceling.
  2. Ask about fees and refunds. Some companies offer a prorated refund on premiums if you paid in full or cancel just after making your payment. But a few insurers charge a fee for canceling.
  3. Submit cancellation forms. You might need to mail or email your written notice or a cancellation form. You usually can download the form from your insurance company’s website.
  4. Let your bank know. If you have a car loan, you might need to tell your bank or the owner of your loan that you’re switching policies.
  5. Cancel automatic payments. While your insurer should stop automatic premium withdrawals after your cancellation is processed, you can also cancel payments from your account just to be sure you don’t get hit with any extra charges.
  6. Have your new insurance ready. Most states require car insurers to report your cancellation to the DMV. If you intend to continue driving, have your new insurance lined up before canceling to avoid a gap in coverage.
  7. Get confirmation. Cancellations by phone are usually effective immediately, but ask for confirmation and written notice to prevent any fees or complications with your car insurance.

What info do I need to cancel my insurance?

  • Policy number
  • Personal info including name, date of birth and Social Security number
  • Your new insurance details including provider, policy number and effective date
  • Proof of plate forfeiture or bill of sale if you’re getting rid of your car

Can I get a refund after I cancel my car insurance?

If you pay for your car insurance monthly, you are not necessarily paying for the cover month to month. 

If you agree to a monthly payment you are taking a credit agreement allowing you to spread the cost of your 12-month insurance policy over a monthly basis. 

This means:

  • Cancellation charges will not necessarily be the same as someone who paid for the policy upfront
  • Charges will vary depending on your policy and how long you have left on your policy
  • You will probably have to pay an extra penalty to buy yourself out of the credit agreement, which is calculated as a percentage of the total policy price

You are, however, most likely entitled to a refund when you cancel your car insurance regardless of whether you pay monthly or upfront unless you have made a claim that year, more of which later.

However, a few providers – generally the ones who don’t charge interest – do charge month-to-month. Which means you could cancel with no fees. 

Make sure you check the terms and conditions of your policy to see if that’s the case with you.

Conclusion:

If you’re looking to switch insurers or cancel your car policy, you have options for canceling your car insurance. Talk to your insurer about cancellation fees and the best process to cancel.

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