Canceling Your Car Insurance Policy

Most states require motorists to have car insurance, and a reliable policy protects your vehicle from common incidents. There may be times, however, when it's preferable to cancel your policy and/or switch to another insurance provider.

The decision to cancel must be carefully considered to determine if it's the right choice for your circumstances—going without insurance could label you as a high-risk driver and affect your ability to get affordable coverage in the future.

Top Reasons for Canceling Car Insurance

A few common reasons for canceling auto insurance include:

  • The car will be in prolonged storage, perhaps due to:
    • Limiting injuries and/or health conditions.
    • Children leaving their cars at home while at college.
    • An extended vacation or trip.
    • The need for lengthy car repairs or restoration.
  • It's a car that's not driven very often (like a classic/vintage vehicle).
    • Remember, a lack of insurance means your car will not be covered if its vandalized, stolen, or damaged by weather.
  • You're moving to another state where your current insurance provider doesn't offer coverage.
    • Talk to your insurance agent - they can recommend other carriers in your new state of residence and help transition you into a new policy.
  • You're selling your vehicle.
  • You're donating the car to charity.
  • You aren't happy with the premiums you're currently paying.
    • Cost is a big consideration for many people, though shouldn't be your major motivation for canceling — remember, when it comes to car insurance, cheaper isn't necessarily better.

Choosing a Better Policy

If you decide to cancel the auto insurance policy you currently have, make sure you have another policy ready to take its place. Finding a new policy means going back to square one as if you were shopping for insurance on your first vehicle.

Start by making a list of the coverage you need and any other priorities you have. This list should at least include:

  • Your state's minimum car insurance requirements.
  • The maximum payments you're willing to make.
  • The discounts you think you're eligible to receive.
  • Special types of coverage you may need (e.g. multiple drivers on the policy, collision and comprehensive, bundled insurance, etc.)

Once you've made your list, it's time to shop around! To get an idea of the available options, look at the same or very similar coverage from at least three different car insurance companies.

When speaking with agents, ask:

  • What fees or costs are associated with the policy?
  • What kinds of discounts are available?
  • How easy it is to get in touch with customer service?
  • Does basic coverage include everything required by state law?

Look up reviews of the most promising companies online to see how current and past customers rate their experiences. See how many complaints have been filed against each agency AND how the problems were resolved so you know what kind of service to expect.

Don't forget to check with your current provider about your options. Your agent can offer details on available discounts and other potential ways to save money. You may be able to avoid canceling and still get all the benefits of a new policy, simply by making a few adjustments with your current insurance carrier.

Hassle-Free Auto Insurance Cancelation

Going through the proper channels to cancel your current policy ensures there won't be any problems with your insurance company or the DMV.

The first thing to do is make sure your replacement policy is ready to go so there's no lapse in your coverage. Agents working for your current and new insurance provider can help make sure everything's in place. The only time you can skip this preliminary step is in a situation where you're no longer going to be driving the insured vehicle.

Once you have a new policy set up, you can get started with cancellation. If possible, wait until your current policy is up for renewal to eliminate any possibility of confusion or billing issues.

Begin by talking with your insurance company—make your intentions of cancellation clear. Your agent will explain the procedure, which may include writing a letter stating your intent to cancel or submitting specific paperwork to the company. Having a paper trail is useful just in case you need to prove the policy was canceled at some point in the future.

Stop any automatic payments to avoid being billed beyond the time of cancellation. Also, inquire about getting a refund if you paid your yearly premiums in full and still have several months left on the policy.

Ideally, you shouldn't have to cancel an auto insurance policy for any reason. If, however, life's changing circumstances require a modification of coverage, be smart about your approach. Weigh all the options and the potential consequences before making a final decision, and be sure that your new coverage has the protections you need for yourself, your passengers and your vehicle. Insurance companies are more than willing to work with you to make cancellations or transitions as easy as possible.