Let's say you've decided that you want to switch insurance companies. Can you simply stop paying your old insurer?
If only things were so easy. Just because you’ve purchased and agreed to a new policy, that doesn't mean you're exempt from paying the bill for your other one. Yes, by law, you will technically still be insured, but you’ll also still be responsible for the old bill.
If you are done using your current company, it is a good rule of thumb to request a cancellation. Letting a policy cancel without notification can cause problems; on the other hand, canceling is fairly simple. Learn how to cancel your car insurance in four easy ways, and learn what happens when a policy is not canceled properly.
- Don't assume that your old insurance is canceled just because you switched to a new carrier.
- Be sure you inform your old provider—whether by phone, mail, fax, or in person.
- Your new agent may be able to assist in the transition and help you cancel your old policy, as well.
- If you fail to cancel your old policy, you might continue to pay premiums or even get hit with fees from the state for coverage lapses.
Four Easy Ways to Cancel Your Insurance
1. Call in a Request
Calling your agent is probably the fastest way to notify them that you want to cancel. Sometimes a phone call is all it takes, but most of the time a signature is also required to complete the process.
If you are switching solely on the basis of a lower price, it could be a good idea to call and speak with your agent. There could be more discounts that can be applied, or perhaps your coverage can be changed on your current policy. This might change your mind about switching companies.
2. Mail or Fax a Written Request
Signing a cancellation request seals the deal when it comes to canceling car insurance. It's as easy as writing or typing out the date, your name, and policy number, and requesting cancellation on the date you are planning on switching carriers. Sign the document and mail or fax it to your agent or direct to the insurance carrier.
3. Go in Person
It may seem awkward to go into your agent's office and ask to cancel your policy. Don't worry, though; it happens often at all agencies. Every agency loses clients from time to time. Unless they are your family member or best friend, it probably won’t hurt their feelings. While your current agent may try to persuade you to stay, a polite decline should put an end to it. Sign the cancellation form, and you'll be on your way.
4. Ask Your New Insurance Company to Assist
Asking your new insurance agent to cancel your old insurance policy is a simple way to complete your cancellation. It's a great way to avoid any awkwardness with your soon-to-be ex-insurance company. All your new agent needs are your old policy number, the dates, and for you to sign the cancellation form. Then the document can be faxed to your old insurer.
Can I Cancel My Car Insurance Anytime?
The best time to cancel your car insurance is after you have another policy set in place. While you can cancel your coverage any time, there are some cases where you may have to pay a penalty. For instance, this is common if you cancel within 14 days after getting your new policy.
Cancellation fees can vary from a set dollar amount up to a percentage of your overall premium cost. The good news is that fees are usually not charged for a standard cancellation, but policies vary.
Talk to your insurer about cancellation, and find out whether you'll be charged any penalties or still owe money on the policy.
If you cancel your insurance within the grace period, it is likely you will still owe money on the policy. A grace period provides coverage for a certain number of days past your payment due date. It also allows you extra time to get your premium paid.
But that doesn’t mean you can get a free few weeks of coverage just by switching insurers. The only way to get out of paying for those days is to provide proof of coverage through another carrier for that time.
Just because you can cancel your car insurance at any time, that does not mean you should. Going without car insurance can put you into a high-risk pool in many states when it comes time to purchase car insurance again.
Four Pitfalls of Canceling Without Notification
It isn't a good idea to cancel your coverage without letting your current carrier know. Here are just a few of the pitfalls of taking that approach.
1. You’ll Have to Pay for the Grace Period
If you do not request a cancellation, and you just allow your policy to cancel on its own, you are technically "canceling for nonpayment." Some policies do cancel automatically at renewal without payment; however, many companies give an automatic grace period.
Grace periods often extend your coverage for 20 days. If your policy is canceled for nonpayment, you will be billed for the grace period. If you do not pay or provide proof of another active policy, the insurer could send your unpaid bill to collections.
2. You’ll Leave a Bad Impression
Leaving an insurance company without giving notice can leave a bad impression. It is a good idea to leave on good terms, especially if there's a chance you may want to return at some point. Rates are always changing; you may want to go back to your old insurance company again one day. To prevent it from feeling awkward in the future, notify your agency of cancellation.
3. Your Policy Might Never Get Canceled
If you are signed up for automatic online payments, your policy will likely continue unless you request cancellation. The money will continue to be withdrawn from your account, and you will have duplicate coverage. It may be possible to get your money back if you provide a declaration page proving you had duplicate coverage.
4. Other Consequences
Insurers are required to inform the state DMV of a lapse in coverage. Certain states impose penalties for a lapse. It may not be wise to leave it to chance, even though you've obtained new insurance.
At the very least, your state DMV may send you a notice asking you to prove that you have coverage. In a worst-case scenario, your driving privileges could get revoked. Then, you'd have to pay a fine and fees for getting them reinstated.
Also, there are special rules if your car is a leased vehicle. In that case, you must make sure that your new insurance lists the leasing company as a loss payee. If you don't, the leasing company will be notified that there was a lapse in coverage. They could then begin the process to repossess the vehicle.
No matter how you cancel your car insurance, make sure to keep an eye on your mail for a confirmation letter. If you cancel midterm, you could receive a refund. It depends on whether you have any unused premium.
Be sure to cancel your insurance after you have your new policy set with a new carrier. Canceling your car insurance should be a simple process. Just don't put it off or forget about it entirely.
Frequently Asked Questions (FAQs)
When should you cancel your auto insurance after selling a car?
You should cancel your auto insurance after you've signed the title over and surrendered your plates to the DMV. However, if you're planning on buying another vehicle soon, it might make more sense to switch your coverage to non-owner auto insurance until you've purchased your new vehicle.
How do you switch auto insurance carriers?
To switch auto insurance carriers, start by getting quotes for coverage. If you're not at the end of your coverage period, confirm whether there are any penalties for switching coverage with your current carrier. Next, apply for your new coverage before your current coverage expires so you don't experience a coverage gap. Make sure your new policy starts before your current policy ends. Finally, contact your old insurance company and notify them you're ending your coverage.