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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Here's what you need to know...

  • When you’re no longer the registered owner of a vehicle, you no longer need your policy
  • Written cancellation requests require specific information to be complete
  • Writing a cancellation letter will not take much time

There will certainly come a situation where you’ll need to terminate your car insurance before it expires.

Whether you are planning on selling your car you own or you are surrendering your driver license, you’ll need to familiarize yourself with the steps that you need to take to cancel your coverage.

Unfortunately, many people assume that simply allowing their policies to lapse is the hassle-free way to abandon their coverage.

While you’re contemplating about canceling your insurance policy prior to the renewal date, read this guide and find out how to construct your letter and what to ask your agent.

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Table of Contents

Why Policyholders Need to Cancel Their Insurance with a Request

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If you pay monthly basis, you might be curious to see when you are paid through and just allow the policy to lapse.

Clients who have a monthly payment plan are the most tempted because they know that the coverage will end within the next 1 to 30 days.

Unfortunately, letting a policy lapse can cost you money and have a negative impact on your ability to buy coverage in the future.

Here are some reasons why you shouldn’t  let your policy to lapse:

Non-payment Lapses May Make You a High-risk

Just because you don’t need coverage now doesn’t mean you won’t need it in the future.

One of the biggest problems with failing to request a cancellation is that a non-payment cancellation is reported to underwriting exchange databases that put you in a high-risk class.

The last thing you want to do is pay high premiums when you are searching competitive premiums because you chose not to write a letter.

You May Not Be Eligible for Cover with the Carrier

Failing to cancel a policy is like failing to put a two-week notice in with an employer.

You might not be eligible to buy insurance through the carrier in the future, even though you did not have ill intentions.

Automatic Payments Will Deduct and the Policy Will Not Cancel

Automatic payments are drafted from your checking account and will continue to be deducted every month. This means the coverage will not cancel and you’ll be paying for coverage you don’t need.

You should suspend your automatic payments and also process a cancellation request to avoid problems with your checking account.

You May Pay More than You Need to Pay

If you sold your car or you activated a new policy weeks ago, you will be paying more than you are obligated to for coverage that you no longer need.

By giving the carrier a cancellation date, you won’t be paying for double coverage for a car that you don’t drive.

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Why You Should Submit a Written Request Instead of the Alternatives

While there are several different ways that you can cancel your insurance, a majority of providers will require their policyholders to submit their signed request in writing before the cancellation is processed.

There are still companies that will take requests over the phone, but for your own protection having a copy of the written request is wise.

Here are some ways to file a request:

  • Mail it
  • Fax it
  • Send it as an attachment through email directly to your agent.

How to Write a Cancellation Letter for Car Insurance

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Written cancellation requests require specific information to be complete.

Some companies won’t process a request if they don’t have the required information.

What you need to write for your request:

  • Name and policy number
  • Reason for cancellation
  • Effective date of cancellation
  • Mailing address and directions on how to forward refund
  • Request for Letter of Experience

Are you entitled to a refund?

Not all companies will offer you a full refund for the premiums that you have not used. Be sure to verify the company has a short-rate or prorate cancellation policies.

Short-rate refunds are smaller than pro-rate refunds because a fee or a percentage of the unearned premiums are deducted.

Writing a cancellation letter will not take much time. If you feel like it is an inconvenience, you have to remember that the coverage may stay in effect if you do not set aside the time to write the request.

If you want to cancel your insurance so that you can save money, it is best to shop the market first.

Start comparing car insurance rates now! Enter your zip code below to get started!

References:

  1. https://www.thebalance.com/can-i-cancel-car-insurance-anytime-527400
  2. https://www.statefarm.com/customer-care/manage-your-accounts/insurance-payment-plans
  3. http://classroom.synonym.com/auto-insurance-after-lapse-coverage-13924.html
  4. https://www.thebalance.com/how-to-cancel-car-insurance-527450
  5. https://www.geico.com/information/faq/cancel-previous-insurance/
  6. http://www.irmi.com/online/insurance-glossary/terms/s/short-rate-cancellation.aspx