Canceling an auto insurance policy can be a simple and straightforward process if you go about it the right way. Doing it the wrong way can leave you uninsured, with a bill to pay, and with a problem in getting future auto insurance.
Many people who cancel their auto insurance are simply trying to switch to another car insurance company. There are a few other reasons that people might be considering a cancellation:
- If you’re moving to a different state, you will need to cancel and purchase a new auto insurance policy with a company that operates in your new state. Even if your current company writes auto insurance in your new state, you will still need to cancel your old policy and acquire a new one.
- If you aren’t driving anymore, you might still want to keep your auto policy in-force. It will mainly depend on if you plan on driving in the future.
- If you have a physical or mental impairment that’s preventing you from driving, then it is okay to cancel your auto insurance.
If you’re moving abroad or to a city like New York City where you know you’re not going to have a car, you might want to consider keeping an auto insurance policy. You can purchase a non-owner policy which gives you liability coverage without tying it to a specific vehicle.
The benefit of doing this is that you will avoid a lapse in coverage. When you are ready to purchase a traditional auto insurance policy in the future and if you haven’t been insured for awhile, it can be difficult to get a new policy in place. Auto insurance company like to take new customers who they know are reliable.
It’s like getting a mortgage on a house. A lender won’t give you a mortgage if you don’t have any credit history. Similarly, if you don’t have continuous auto insurance history, it can be difficult to get a new policy in the future.
Non-owner policies are usually quite a bit cheaper to buy than a regular auto insurance policy, because there is no specific vehicle to insure.
It can be worth the cost to make sure you can get proper coverage down the road.
When Is It Okay To Cancel?
You can cancel your auto insurance policy at any time during the policy period. The process is the same whether you’re doing it in the middle or you wait until the end of the policy period.
Before we go into that process, it’s critical that you know how cancellations at the end of the policy period work.
Auto insurance policies do not automatically cancel at the end of the term. In fact, the opposite is true. Assuming everything has been good with your policy (no DUI’s or anything), the insurance company will usually automatically offer you a renewal policy.
And if you don’t actively cancel the policy, the insurance company will expect that you are going to renew. This means that they will send you a renewal policy and a bill for your next policy period. If you pay automatically, they might even pull from your account in order to cover the next month’s payment.
If you pay manually and you don’t go through the process of canceling your policy properly, then you will probably just try to “let the policy go”. You won’t pay your renewal bill and you’ll start a new policy with another company.
The problem of doing it this way is that your old company won’t know that you have purchased auto insurance with another company. They will just know that you haven’t paid your bill yet. They will then cancel YOU for nonpayment of premium.
This can have unintended and negative consequences. First, having nonpayment of premium on your insurance history can make it more difficult to acquire new insurance with a different company. Insurance companies are wary of doing business with people who don’t pay, so this can be a problem.
Furthermore, there’s a chance that your credit score will take a knock since the credit bureaus can see if you have an unpaid bill.
Lastly, there is also a chance that you could still owe the company money. You might think you don’t have to pay since you’ve canceled. But if you do owe them money and they don’t receive it, then they will turn your unpaid bill over to a collection’s agency.
How To Cancel The Right Way
Whether you are canceling mid-term or at the end of your policy period, let your insurance agent or company know that you are canceling and give them the date of cancellation. Ideally, you will already have a new policy set-up to go into effect the same day, or even before that date in order to avoid a coverage gap.
Once you’ve notified your insurance agent/company, they will send you a cancellation form to sign. Sign it and return it back to them ASAP. The company will then process your cancellation and square away any money.
If you still owe them money, you’ll need to pay that before you can cancel. Sometimes, you will get money back. Insurance companies will only charge you for the days that you’ve had coverage. So, if you’ve paid for the entire year and cancel 9 months into the policy, the company will send you money back for those other 3 months.
Always make sure that you’ve aligned the dates for both the cancellation and the new policy and make sure your new policy is up and running by the date of cancellation.
Canceling an auto insurance policy doesn’t have to be a complicated process. If you go about it the right way, it should be smooth and painless. However, canceling the wrong way can have some serious consequences.