Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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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 Chris Harrigan

UPDATED: Apr 13, 2022

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Key takeaways...

  • As a policyholder, you have the right to cancel your insurance policy at any time during the contract
  • Even though you are entitled to cancel your insurance, driving uninsured is always against the law
  • If you decide to submit a request to cancel your policy early, the insurer may charge you a fee to process it
  • Some companies will charge a flat cancellation fee and others will charge a penalty that’s based on balance
  • If you are charged a cancellation fee, it will be deducted from whatever refund you’re entitled to receive

When you are on a mission to find competitively priced auto insurance, the best thing that anyone can do is shop around.

Unfortunately, many people who are in a rush to get coverage will purchase the quote they’re given just to get the chore done. If you’ve ever been guilty of doing this, you’ve probably ended up paying too much for your coverage.

You can get tired of paying high-cost insurance premiums rather quickly. If you realize that you’ve been paying too much for your coverage during your policy period, you don’t have to wait until your policy renews to make a switch.

Enter your zip code above to see if you can find better car insurance rates!

Before you jump at the opportunity to lower your premiums you should know that you could be charged a cancellation fee for ending your contract. Here’s a guide to insurance cancellation fees:

Know Your Consumer Rights


Consumers always have rights but auto insurance consumers have very definitive rights that are laid out in the Consumer Bill of Rights that’s published by the state’s department of insurance.

You should find the document to see if any of your rights are ever being violated.

One of the rights that is the same across all state lines is that consumers have the right to buy insurance.

Another rule that’s also the same from state to state is that all policyholders who are named insureds on the policy are allowed to cancel their policy whenever they desire and for any reason.

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Reasons to Cancel Your Insurance Early

There are valid reasons to cancel your coverage early and then there are not-so-valid reasons. You may have the right to request the cancellation, but that isn’t an open invitation to ask for the contract to be terminated just because you’re tired of paying for insurance.

Here are some of the reasons that an early cancellation may be warranted:

  • You sell your only car
  • You move out of state to an area the insurer doesn’t service
  • You are relocating out of the country
  • You no longer drive and give your vehicle away
  • You switch to another auto insurance carrier for a better premium
  • Your only car is totaled
  • You place your car in storage and surrender your license plates

How do you cancel your auto insurance early?

If you happen to want to cancel your insurance early for any reason above, you need to contact your carrier and ask how you can get the cancellation processed. Some companies are willing to process it by phone, but this isn’t common.

Instead, you’ll probably be asked to submit your request in writing or by email. The request needs to include:

  • Your name
  • Your address
  • Your policy number
  • The effective date of the cancellation
  • The reason for the cancellation
  • Proof of sale or other coverage (if you’re backdating the cancellation)
  • A signature
  • Your contact number

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Is there a fee to cancel your coverage?

There is a chance that there could be a fee to cancel your insurance early.

Not all companies charge these cancellation fees, but if you’re insured with one that does it’s important that you know before you switch to another carrier mid-term.

There are states that don’t allow fees to be charged, but most find fees fair as long as they’re reasonable.

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What type of fee will you be charged?

You will be charged one of two fees when you’re insured through a company that does have a cancellation fee policy.

Some companies will charge you a processing fee that covers the administrative costs to cancel the policy and send out your paperwork. This fixed fee could be just $10 or as much as $50.

Other companies charge a fee that acts as a penalty for ending the policy early. If you’re charged a penalty fee, the actual amount you’ll pay depends on how much time is left on the policy.

You’ll have to pay a percentage of the unearned premiums that are left on the contract.

What does a percentage-based fee look like?


If you’re confused by the percentage-based short-rate fee, it’s important to get an idea of how it works. If you look at your contract and it says that you’ll pay 10 percent of the unearned premiums left on the contract, you’ll need to take a look at your balance.

The purpose of these fees is to recoup for some of the premiums the company won’t receive.

If you pay $600 every six months and you’re two months into the contract, you’ll have a balance of $400. This means that you’ll pay 10 percent of the balance which would constitute a $40 fee.

The more time left on the policy, the higher the short-rate penalty fee will be.

How are you charged the fee?

If you have paid up your premiums, any fee that is due to the carrier will be deducted from your refund before the check is issued. The remaining credit will then be sent to you in a check with a statement showing the fee was deducted.

Those who cancel right before their next payment is due may get a bill in the mail for the remaining fee that’s owed.

If you are not happy with your rates, don’t start to shop around for a new plan until you know if you will be charged a fee. Cancellation fees in the auto insurance industry are pretty common.

Some carriers shy away from charging fees in certain situations and other companies charge a fee no matter what happens. Look at this policy before you buy insurance. Once you know, get instant online quotes and see if you really can save money by making the switching.

Enter your zip code below to compare car insurance rates from multiple companies!


  1. https://www.thebalance.com/can-i-cancel-car-insurance-anytime-527400
  2. https://www.cga.ct.gov/2006/rpt/2006-R-0519.htm
  3. https://www.tdi.texas.gov/rules/2012/documents/Consumer_Bill_o1.pdf
  4. https://www.mass.gov/ocabr/government/oca-agencies/doi-lp/massachusetts-consumer-bill-of-rights-for.html
  5. https://www.thebalance.com/how-to-cancel-car-insurance-527450
  6. https://www.state.nj.us/dobi/division_consumers/pdf/everythingauto2006.pdf
  7. https://www.oregon.gov/DCBS/Insurance/gethelp/Documents/2085.pdf
  8. https://www.insuranceopedia.com/definition/1102/short-rate-cancellation
  9. https://www.irmi.com/online/insurance-glossary/terms/s/short-rate-cancellation.aspx
  10. http://classroom.synonym.com/cancel-car-insurance-early-refund-money-15068.html