Whether you no longer own a car, are moving out of state, or want to switch providers, there are many valid reasons to consider canceling your current car insurance policy. But while canceling auto insurance is not difficult, it might not be the right choice in some situations. Some drivers might be better served by switching to another policy. For instance, occasional drivers who regularly cancel policies as a way to get temporary car insurance could look into usage-based options like pay-per-mile car insurance instead to maintain required coverage.
Learn more about when and how to cancel car insurance coverage, as well as situations where canceling coverage altogether might not be the best choice — and what alternatives could work better for those drivers.
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How to Cancel Auto Insurance Coverage
Canceling auto insurance coverage is generally straightforward. To cancel car insurance, notify your car insurance provider and follow its cancellation procedures. The exact steps can vary depending on your insurer, but it generally follows this process:
- Check your insurer’s cancellation process for timing and method preferences. Different insurers may handle cancellations differently. Some may process cancellation requests over the phone, while others may ask policyholders to sign and submit a cancellation letter. Find out how much notice, if any, your insurer requires to cancel a policy.
- Ask about early cancellation penalties. If you want to cancel your current policy before the end of the term, find out if the insurer charges a cancellation fee. Some drivers may choose to delay cancellation until the end of the policy term to avoid penalties.
- Choose a coverage end date. Think about your driving needs and decide when you want your current car insurance policy to end. For example, if you’re selling your car and not getting a new one, ensure your coverage remains active until the sale goes through.
- Notify your current insurer. Contact your insurer to begin the cancellation process. Avoid stopping your payments without notifying your insurer about your intent to cancel auto insurance. While insurers may cancel car insurance for non-payment, this could make it harder to get a new policy in the future. In addition, your future insurers may deny coverage or base premium payments on your insurance history, including history of non-payment.
- Confirm cancellation. Ask your insurer or agent to provide written notice confirming the policy is canceled. Keep this confirmation for your records. This proof might be useful in some situations, such as if the insurer mistakenly keeps the policy active.
It’s important to avoid driving your car after canceling your car insurance unless you’ve set up a replacement policy. In the majority of states, it’s against the law to drive without car insurance, and all states require at least proof of financial responsibility.
Can You Cancel Insurance at Any Time?
Policyholders can request to cancel their car insurance at any time and for any reason. However, different insurers may have different rules about how they handle cancellations before the policy’s expiration date. For example, some insurers charge cancellation fees when policyholders choose to end their coverage ahead of the policy’s end date. Depending on the insurance company, they could retain a portion of your premium or charge a flat cancellation fee.
How to Switch Car Insurance Policies
For drivers who plan to switch car insurance policies and not just drop coverage altogether, there are some additional steps to the cancellation process. You’ll need to choose a replacement policy to take over coverage. Before canceling your current policy, shop around for a new policy that meets your needs, factoring in your driving habits and your state’s minimum liability requirements. Once you find a replacement policy, avoid a coverage gap when switching coverage. Work with your insurer or agent to line up your policy dates. To avoid a lapse in coverage, end your current policy on the day your new policy begins.
Why You May Want to Cancel Your Current Policy
There are many valid reasons why drivers might need or want to cancel their car insurance. You may want to cancel your policy if:
- You’re moving out of state. The minimum requirements for car insurance vary from state to state, so it may not be possible to keep the same policy after a move. For example, drivers in California must carry $5,000 of liability coverage for property damage, while those in Arizona are required to have $15,000.
- You’re selling your car. If you’re not planning to replace your car, keeping your car insurance policy may be unnecessary. However, if you’re getting a new car, transferring the existing policy to the new vehicle could be an option.
- You’re looking for a lower insurance rate. In 2022, the national average car insurance premium in the U.S. was $1,771, up from $1,204 in 2019. Budget-conscious drivers may choose to cancel their current policy if another company offers lower insurance premiums for similar coverages.
Why You Should Not Cancel Your Car Insurance
Car insurance is mandatory in most states, and uninsured drivers may face fines or other penalties, even if they think they have a good reason to forgo insurance. Avoid canceling car insurance for any of the following reasons:
- You do not drive often. The average American driver travels 13,476 miles per year, and if you drive far fewer miles than this, car insurance may seem wasteful. However, accidents can still happen on short, infrequent drives. Instead of canceling, ask your insurer about policies for infrequent drivers.
- Your premiums are high. Drivers on tight budgets may be tempted to cancel their coverage to reduce costs, but this could lead to higher costs in the long run. Uninsured drivers may be responsible for the costs of injuries or damages they cause, or face fines and license suspensions if they are caught driving without insurance. In addition, some insurance companies may charge higher premiums if they find lapses in coverage in your insurance history. Alternative options for lowering premiums could include raising your deductible or dropping optional coverages, or shopping for another policy.
- You’re going on an extended vacation. Drivers who plan to be away from home for a couple of months may consider letting their car insurance lapse to reduce costs. However, when they return and reinstate their coverage, they may face higher premiums. To avoid a lapse in coverage, consider temporarily suspending any coverages that are not required by your state or lender instead.
Consequences for Driving Without Insurance
Whatever your reason for deciding to cancel your car insurance, time the cancellation carefully to avoid a lapse in coverage. A car insurance lapse is any length of time when you own a car but do not have insurance. While a short gap between car insurance policies may not seem like a big deal, uninsured drivers could face several consequences, including:
- State fines: Penalties for driving without insurance vary by state. For example, Maryland drivers could be fined $150 for a short coverage gap, while Delaware drivers could be fined $1,500.
- License suspension: States may temporarily suspend uninsured motorists’ driver’s licenses. The length of this suspension can vary from state to state.
- Higher premiums: After a lapse in coverage, insurance companies may see drivers as higher risk and charge higher premiums.
- Financial exposure: Uninsured drivers who are involved in an accident may be responsible for the costs of injuries and damages to themselves or others.
For help deciding when to cancel your car insurance to avoid a lapse in coverage, talk to a trusted insurance agent.
Auto Insurance Alternatives for Infrequent Drivers
Infrequent drivers may consider canceling their car insurance if they feel like they’re paying for coverage they do not need. But before canceling, ask your insurer or agent about budget-friendly car insurance alternatives for people who do not drive often instead.
Pay-per-Mile Car Insurance
This mileage-based insurance is designed for infrequent drivers, such as people who work from home. Generally, insurers charge a monthly base rate to keep the policy active, plus a fee based on the actual number of miles you drive per month. That means drivers pay lower premiums if they drive fewer miles.
Non-Owner Car Insurance
These policies provide liability coverage to people who do not own a car but occasionally drive rental cars or borrow cars from friends or family members. Non-owner car insurance could help pay for bodily injury or property damage the policyholder causes to others.
People who are not driving because their car is in storage may consider adjusting their policy to lower costs. Temporarily suspending liability and collision coverages while maintaining comprehensive coverage could be an option. Comprehensive coverage is the part of a car insurance policy that covers non-collision damages, such as theft or fire. Before you drive, however, be sure you reinstate the minimum liability coverage required in your state.