How To Cancel Car Insurance: Steps for a Smooth Separation
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Screenwriter Max Wrinkler once admitted that his first girlfriend broke up with him by reading a letter she and her therapist had written on a yellow legal pad. Thankfully, you don't need a therapist's help to move on from your auto insurance carrier.
Maybe you had a bad customer service experience, you found a cheaper rate elsewhere, or you're moving to a state your carrier doesn't service. Why you're canceling your auto insurance doesn't matter so much as how you go about the cancellation. A single misstep could leave you with cancellation fees, coverage gaps, or even duplicate coverage -- all of which hit your wallet in some form.
You can avoid those outcomes and their associated expenses by breaking ties with your insurer the right way. We recommend following the five cancellation steps explained below. You can also jump over to our carrier-specific cancellation guides, which have more detail on carrier policies and cancellation fees.
SUMMARY
Cancellation guides by the insurance company
How do I cancel my car insurance?
Canceling your car insurance, in the least expensive way possible, is a multi-step process. We break it down this way:
1. Know your options: You may not actually need to cancel your insurance. Depending on your situation, you might be better off pausing or reducing your coverage.
2. Research the cancellation process: When you first decide you want to cancel, a quick check-in with your insurer on the cancellation process helps you plan out the next steps.
3. Secure replacement coverage if needed: Unless you're selling the car or leaving the country, you need to secure replacement coverage. Your old insurer may need proof of new coverage before processing your cancellation.
4. Request your cancellation: You should schedule your cancellation only after you've set up your new auto policy.
5. Sign any documentation if required: Some insurers may ask you for a signed cancellation letter.
6. Cancel any automatic payments: Make sure you don't keep paying your old insurer after the cancellation.
7. Make a seamless lapse-free break: Avoid lapses in coverage when switching from one insurer to another to prevent penalties like price increases.
1. Know your options
Canceling your car insurance isn't always the right way to go. Depending on your situation, there may be a better alternative, such as pausing or reducing your coverage. Here's a look at when it makes sense to pause, reduce, or outright cancel your car insurance.
When to pause your car insurance
Pausing insurance temporarily has one big advantage over canceling the insurance outright: Your insurance record won't show a coverage gap. A coverage gap is a red flag for insurers. They view it as risky that you'd own a car and not keep it continuously covered. That means when you do reinstate your insurance, your premiums will likely be higher.
You can pause or suspend your coverage when all of these conditions apply:
Your insurer allows it. More carriers are offering insurance pauses in the wake of the coronavirus pandemic, but smaller carriers may not have this option.
No one will drive that car for 30 days or more. The car might be in storage or you might be traveling. If you are traveling, take the keys with you so there's no chance someone will borrow the car.
The car is not financed. Your auto lender won't allow you to pause the coverage.
When you pause your insurance, you cannot, under any circumstances, drive that car until you reinstate the coverage. You may not have to promise much to your carrier to pause the coverage, but you'll likely have to certify to the DMV that the car won't be in use. Violating that certification and knowingly driving without insurance is a really bad idea. Get pulled over for speeding, for example, and you'll have to deal with the speeding ticket and an extra violation for driving without insurance. The penalty for that varies by state, but it commonly results in a license suspension. And if you cause an accident, you're in even bigger trouble -- because there's no coverage to help you pay for the damages to your car or another driver's car.
When to reduce your car insurance
Reducing your car insurance lowers your premiums and also prevents a coverage gap. This is a good option when:
You carry higher coverages than the state-mandated minimums.
The car will be in storage, but your insurer or lender won't let you pause coverage.
It's not advisable to reduce coverages solely to lower your premiums. That strategy can backfire as soon as something bad happens. The only exception would be if your financial situation has changed since you initially purchased the insurance. For example, if you've increased the size of your emergency fund, you could afford to raise your deductibles. Or if you have less money and assets to protect than previously, it might be appropriate to lower your coverage limits.
When to cancel your car insurance
It makes sense to cancel your auto coverage outright when any one of these conditions apply:
You are moving to a different carrier.
You have sold the vehicle.
You are leaving the country.
You should not cancel your coverage, however, if you're moving to a state that doesn't require auto insurance. New Hampshire doesn't have mandated coverage minimums and you can drive without insurance in Virginia if you pay the state $500 a year.1 Your $500 does not offer any type of liability protection; it's just a fee. No matter what your state requires (or doesn't require), it's never worth the risk to drive without car insurance. Even a small fender-bender would expose you to property damages and, potentially, medical expenses, too.
2. Research the cancellation process
It's useful to know your carrier's cancellation process early on because that helps you sidestep cancellation fees. You can find your carrier's cancellation rules in your policy documentation, but it's easier to call your insurer and speak to an agent. Here are the questions you should ask:
Am I subject to a short rate? A short rate is essentially a cancellation fee that's called something else. If you ask only about cancellation fees and not specifically about the short rate, you might get a misleading answer.
Am I subject to a cancellation fee?
How do I avoid the short rate and/or cancellation fee? You should be able to avoid all fees by canceling coverage on the day your policy expires. But ask this question anyway to see if your carrier has other requirements.
How do you handle refunds? You'd qualify for a refund if you cancel in the middle of a policy term that's paid for. Ask the carrier how they calculate the refund -- it should be pro-rated -- and how it takes to process that refund.
How do I cancel? Most insurers will take cancellations in person at your agent's office or over the phone. A phone call is usually the easiest and quickest method. You may need to sign a cancellation letter also, which can be done by mail or email.
How much notice do you need to process my cancellation request? Most insurers will cancel your coverage on the same day.
3. Secure replacement coverage if needed
As long as still own that car, you need replacement coverage. Shop around early enough that you have time to choose your best option and initiate the new coverage. We recommend initiating the new policy the day before you cancel the old one. That way, there's no chance you'll have a lapse in coverage.
4. Request your cancellation
Once you have new coverage set up, you can (finally!) cancel your existing policy. To avoid back-and-forth with your carrier, revisit your notes from Step 2 above and prepare for any extra steps or documentation the insurer mentioned. At a minimum, you'll need these details on hand:
Your name, birth date, and Social Security number
Your policy number for the coverage you are canceling
A new policy number and carrier name for any replacement coverage, or a bill of sale showing you've sold the car
The date on which you want to end your coverage
5. Sign any documentation if required
Some insurers may ask you to sign a cancellation letter. If the insurer cannot provide you with a standard form, you can handwrite or type a simple cancellation request, sign it, and drop it in the mail. Or scan it and send it via email if your carrier allows it. The letter should include your name, birthdate, and cancellation verbiage such as, "I am requesting cancellation of my auto insurance policy (# POLICY NUMBER) as of this date."2
6. Cancel any automatic payments can
Automatic payments can be initiated either by your insurer or by you through your bank. Insurer-initiated payments should stop automatically when you cancel your policy, but the payments you set up through your bank's bill-pay feature will continue. Log in to your bank online and cancel any recurring payments directed to your old insurance carrier.
7. Make a seamless lapse-free break
A seamless break with your car insurer happens when you transition to a new carrier with no lapse in coverage, no cancellation fees, and -- importantly -- no consults with your therapist. Tie up all loose ends by getting confirmation of the cancellation from your old insurer and a binder for your new coverage.
- Delbridge, E. (n.d.). Did you know some states do not require car insurance? Retrieved June 18, 2020, from https://www.thebalance.com/states-with-no-car-insurance-requirements-4121731
- Free car insurance cancellation letter. (2020, May 05). Retrieved June 20, 2020, from https://www.compare.com/auto-insurance/resources/cancellation-letter
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