Can you cancel auto insurance early?

If you need to cancel your insurance before the term ends, it’s important to review the terms of your contract first. Not only can an early termination lead to a cancellation fee, if you have a lapse in coverage it can also lead to fines and court-ordered penalties.

Doing a small amount of research before you request a cancellation can save you time and money.

A standard insurance policy runs either for six- or 12-month term. But you’re obligated to stay in the contract for the entire term. Before you pick up the phone or send a fax to cancel your policy, here’s what you should know.

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All Companies Must Honor the Consumer Bill of Rights

When you sign up for insurance, your auto insurance carrier is required by law to provide you with a summary of your rights under state law, which is called the Consumer Bill of Rights.

They are adopted by the state’s regulatory agency, and all licensed carriers that sell Property and Casualty insurance must comply with them.

All state departments give their consumers theright to shop for insurance in a competitive marketplace.

Since it’s the state department’s job to ensure that rates are competitive in nature, you are urged to shop the market to find the best products with the best pricing.

You Have the Right to Cancel a Policy That You Own at Any Time

As an insurance consumer, you have the right to cancel or change at any time.

You don’t have to wait until your term is up to shop around for new coverage.

If you find a better price while the term is still active, you can submit a cancellation request. If you want to lower premiums, you are free to make changes to non-mandatory coverage options.

Are you entitled to a refund if you cancel early?

If you decide to terminate your policy early, you are entitled to a refund if you have unearned premiums.

If you’ve paid premiums monthly and you cancel coverage in the middle of the month, you will receive a refund for 15 days of coverage you didn’t use.

If the company charges a fee, the fee will be deducted from your refund before it’s issued.

Some states give carriers the option to charge a cancellation fee when a policyholder cancels their coverage before the renewal. Not all carriers charge a fee even if they are permitted to.

If your carrier charges a fee, it will either be a percentage of the unearned premium or a fixed fee.

Is it better to cancel early or wait to switch?

It doesn’t always make sense to cancel your insurance even when you find lower rates elsewhere.

If you are shopping around, you have to consider how much you’ll save by making the switch.

After you calculate the savings, determine if your carrier will charge a cancellation fee. If the fee is higher than what you would save, it might be best to wait.

Tips to Avoid Issues When You Cancel Your Insurance

If you do your research, you don’t have to worry about having a lapse of coverage. Unfortunately, not everyone knows what to do when they are terminating their contract.

Here are some valuable tips to ensure that your policy cancels and you get your refund promptly:

• Put your cancellation request with the effective date in writing
• If you move, make sure to update your address on your request
• If you have automatic payments set up, make sure to cancel them if your request is sent close to the due date
• When switching carriers, cancel the policy effective the date the new coverage starts
• Don’t cancel your insurance before you turn in your plates or transfer ownership to your vehicle to avoid a fine

If you’re tired of paying high premiums with your current carrier, shop around and look for a lower rate.

Use our FREE online rate comparison tool and you can get dozens of quotes in the blink of an eye. Enter your zip code below to get started!