Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 21, 2020

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Key takeaways...

  • When you cancel your car insurance to switch companies, you may lose more than money
  • It’s a good idea to check with your insurance company about their cancellation
  • Some insurers offer loyalty programs with benefits that accumulate over time

You do not have to wait until the renewal period to cancel your car insurance coverage. If you compare price quotes and find a better deal, you can switch today.

Review these tips and find out whether early termination is right for you. Enter your zip code above in our comparison tool if to compare car insurance quotes for FREE!

Table of Contents

You May Lose Loyalty Discounts

When you cancel your car insurance to switch companies, you may lose more than money. Some insurers offer loyalty programs with benefits that accumulate over time.

If you have worked with your current insurer for over three years, you may have built up accident forgiveness benefits.

When you switch insurers, you lose these accumulated perks.

Go through a free price comparison and then contact the competing insurers for more details on why you should work with each company.

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You May Pay a Penalty

Even if you are canceling your auto insurance because you sold your vehicle, you may not receive 100 percent of your premiums back.

Insurance companies use one of four methods to calculate your refund:

  • Pro rata – Under a pro-rated policy, you would receive the unused portion of your insurance coverage.
  • Percentage of pro rata – Drivers who terminate their coverage mid-term receive a certain percentage of the premiums already paid. Many auto insurers use the 90 percent of pro rata method.
  • Short rate – Another type of penalty is the short rate clause. A policy owner who stops his or her coverage before a certain date pays higher insurance rates than a person staying for the full term.
  • Flat fee – The flat cancellation fee is the simplest penalty to understand. No matter when you cancel, you are charged a flat rate. Cancellation fees range from $25 to $150 or more.

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Don’t Break the Law

Every state requires you to maintain continuous car insurance coverage for any vehicle you will be driving. If you cancel your current policy without setting up a replacement policy, your coverage will lapse and you may be breaking the law.

The best solution is to start your new policy and end your previous policy on the same date.

Always put the new policy in place first, with contracts issued, premiums paid, and insurance cards in hand. Then you can notify your current insurance company of your intention to terminate your policy.

Ways to Cancel Car Insurance

Canceling car insurance is simple in most cases.

You have four options:

  • The best option is to cancel online. You receive an immediate confirmation, which you can print and use as proof of termination.
  • The next best option is to call and ask for a cancellation form.  In some situations, you can download this form from the insurer’s website or ask a representative to fax the document to you.
  • If you do not want to wait for an official form, you can mail a certified letter to your insurance agent or company. The letter should include the policy number, the names of the drivers on the policy, the cancellation date, and the signatures of all policy owners.
  • The last option is to stop paying your premiums. Your auto insurance company will terminate your coverage, but you may have problems getting insurance in the future with this method.

Shop for the best rates on car insurance and then start the cancellation process. By following these tips and canceling coverage early, you can exit a bad relationship and save hundreds over the life of your policy.

Enter your zip code below in our FREE comparison tool to start your search for new car insurance.

References:

  1. https://www.geico.com/save/discounts/organization-member/
  2. https://www.statefarm.com/
  3. https://www.nationwide.com/index.jsp