Can I get a refund if I switch auto insurance?
You’ll have to read the fine print to learn about your policy’s stipulations, but you can usually get a refund on car insurance for unused premiums.
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Dani Best
Licensed Insurance Producer
Dani Best has been a licensed insurance producer for nearly 10 years. Dani began her insurance career in a sales role with State Farm in 2014. During her time in sales, she graduated with her Bachelors in Psychology from Capella University and is currently earning her Masters in Marriage and Family Therapy. Since 2014, Dani has held and maintains licenses in Life, Disability, Property, and Casualt...
Licensed Insurance Producer
UPDATED: Apr 11, 2024
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Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
UPDATED: Apr 11, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- You can’t get a refund if your insurance company canceled your policy for nonpayment
- Insurance companies may charge a cancellation fee that will be taken out of your refund amount
- If a company chooses not to renew you for another policy period, this doesn’t count as a cancellation, and there is no refund
How do I get a refund on my car insurance? Whether you can get money back from car insurance depends on the fine print in your auto insurance policy.
Generally, if you cancel before the end of your policy period, you should be able to get a refund for any unused coverage.
However, every auto insurance company differs in what refunds it gives or any early cancellation fees it may charge. Make sure to read up on how to cancel your car insurance to avoid any major issues like hefty cancellation fees.
For refund information, continue reading to learn how to get a car insurance refund, standard refund protocols, and more.
How to Get a Car Insurance Refund After Canceling
There are several reasons you may choose to cancel, but there are a few differences regarding whether you cancel the policy yourself or your insurance company cancels it. We’ve outlined refunds for both situations below.
You can usually just call your insurer and ask about the possibility of a refund when you cancel. You might also want to ask how the payment will be issued, as you may choose between a check or direct deposit. The insurer may just issue the refund to your original form of payment.
Refunds If You Cancel Your Policy
Can I get a refund on my car insurance when I cancel? One of the more common reasons drivers ask about a refund discount on car insurance is because they canceled their auto insurance policy. Whether you receive a refund depends upon the following factors:
- When the car insurance policy is canceled. If you cancel with less than a week of coverage left, you likely won’t get a refund.
- The company’s refund policy. Not all companies offer a refund. If yours doesn’t, it’s best to wait until the end of your policy period to switch coverage.
- If there is a cancellation fee. Some companies charge a cancellation fee if you cancel mid-policy, which could reduce your refund or eliminate it altogether.
For example, you may not receive a State Farm cancellation refund if the State Farm canceling policy fee is more than the refund. There is also a short rating to consider, where insurance companies charge more expensive rates at the beginning of a policy in order to offset set-up costs.
If this is the case, you will receive less of a refund than you might expect after paying for the first few months of coverage.
Let’s say you prepay for six months of coverage, and the company short-rates your policy. A larger sum will go towards the first few months, meaning that the rates you pay upfront won’t be divided evenly among the six months, so you will receive a lesser amount back.
Payment in Full vs. Installments
When it comes to refunds, it matters whether you paid in full for coverage or were paying installments each month.
If you are paying in installments, you may not get a refund back unless you just paid for coverage and canceled a day or two later. With payment in full, you are more likely to get a car insurance down payment refund, as you prepaid for months of coverage ahead of time.
Refunds if the Company Cancels Your Policy
Can you get a refund on your car insurance if your insurance company cancels your policy? If your insurance company canceled your auto insurance policy, you should still be able to get a refund if you paid in full.
For example, if you are deemed a high-risk driver after an accident and your insurance company drops you, you should be refunded. However, it is different if your insurance company cancels your policy due to nonpayment.
In cases of cancellation due to nonpayment, you aren’t entitled to any refund from the insurance company, as you owe the insurance company money.
Keep in mind that a company canceling your policy is different from nonrenewal. A nonrenewal will be if an insurance company chooses not to renew your policy at the end of your coverage.
Let’s say you were in multiple accidents, and your insurance company decided you were too risky to insure. But because the company provided coverage for the duration of your paid policy period, it is under no obligation to give you a refund.
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Refunds for Policy Changes
Although less common than refunds for cancellations, there are sometimes refunds if you make a change to your policy. If you have prepaid in full for coverage but then made a change to your coverage that reduces your rates, you should get a small refund as you will have a cheap auto insurance rate in the future.
For example, removing a teenage driver from your policy saves you a few hundred in rates every year. You should get a few hundred back if you prepaid for the higher rates.
Understanding Refunds When You Switch or Cancel Car Insurance
When you decide to switch or cancel your auto insurance, whether you receive a refund depends on your policy’s terms and how much of the coverage period remains. Insurers typically calculate refunds on a pro-rata basis, meaning you will be refunded for the unused portion of your premium. However, it’s important to be aware of any potential cancellation fees or penalties that could reduce your refund. For example, some insurers may charge a flat fee, while others might calculate the fee based on how much of your policy term has elapsed. Additionally, insurers might use a “short rate” cancellation method which imposes higher penalties for early cancellation to recoup administrative costs.
Refunds for COVID-19
Some auto insurance companies offered refunds to existing customers at the beginning of COVID-19, as drivers were staying at home and therefore at less risk of crashing. Discounts were also offered to new customers who joined and drove less due to COVID-19. However, there aren’t currently any promotional offers for refunds for car insurance.
If you want to lower your auto insurance rates, see if your insurance company offers any other discounts. For example, you may qualify for a low mileage discount if you work from home and drive less after COVID-19.
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Step-by-Step Guide to Cancelling Your Car Insurance
To cancel your car insurance effectively and ensure eligibility for a refund, follow these steps:
- Review Your Policy: Check your insurance policy for details about cancellation procedures and any potential penalties or fees.
- Contact Your Insurer: Reach out to your insurance company via the preferred method—phone, email, or written notice. Confirm the details you need to provide and ask about the steps involved in the process.
- Provide Necessary Information: You might need to submit a formal cancellation request. Include all required details such as your policy number, effective date of cancellation, and your contact information.
- Confirm Cancellation and Refund Details: Ask how your refund will be processed and how long it will take. Confirm any fees deducted and the final refund amount.
- Follow Up: If you don’t receive the refund within the expected timeframe, contact the insurer to inquire about the delay.
What to Expect After Cancelling Your Insurance
After you cancel your insurance, the process for receiving a refund usually begins immediately, though the time it takes to receive the refund can vary. Most insurers process refunds within a few weeks of cancellation, but it can take longer depending on the company’s policies and the method of refund (e.g., check, direct deposit). If the refund amount is less than expected, be prepared to inquire with your insurer about how they calculated the refund. Keeping a copy of all communications can be helpful if disputes arise.
State Farm and Other Insurers: Refund Policies Explained
Refund policies can vary significantly between insurers. For instance, State Farm typically allows for a straightforward cancellation process with prorated refunds, minus any applicable fees, if you cancel before your policy term expires. Comparatively, other insurers might have more stringent policies with higher cancellation fees or no refund policy if cancelled after a certain period of the policy. Understanding these differences is crucial when choosing an insurer or deciding to cancel a policy. Always review the refund and cancellation policies before signing up for a new policy to avoid surprises.
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The Final Word on Car Insurance Refunds
In most cases, if you prepaid for car insurance coverage and chose to cancel your policy before it ends, you are entitled to a refund minus any cancellation fees. The exception would be if your auto insurance company canceled your policy for nonpayment, in which case you would owe them money.
If you are looking to save money on auto insurance, the best thing you can do is shop around for quotes. You can use our free quote comparison tool to find a local auto insurance company that offers cheaper rates.
Frequently Asked Questions
Will I receive a refund if I switch auto insurance before my policy expires?
Yes, it is possible to receive a refund when you switch auto insurance before your policy expires. However, the amount of the refund will depend on several factors, including the terms and conditions of your current insurance policy, the timing of your cancellation, and any applicable fees or penalties.
How can I determine if I am eligible for a refund when switching auto insurance?
To determine if you are eligible for a refund, you should review the terms and conditions of your current auto insurance policy. Some insurance companies may offer a pro-rata refund, which means you will receive a portion of your premium back for the unused coverage period. However, certain policies may have cancellation fees or penalties that could affect the refund amount.
When is the best time to switch auto insurance to maximize my refund?
The best time to switch auto insurance and maximize your refund is typically before your policy renewal date. By doing so, you can avoid potential cancellation fees or penalties and receive a pro-rata refund for the unused portion of your premium. It is advisable to contact your insurance company directly to confirm the specific refund policies and any applicable fees.
Are there any fees or penalties associated with canceling my auto insurance?
Some insurance policies may have cancellation fees or penalties. These fees can vary depending on the insurance provider and the terms of your policy. It is crucial to review your policy documents or contact your insurance company to understand any potential fees or penalties associated with canceling your auto insurance.
How do I cancel my auto insurance and request a refund?
To cancel your auto insurance and request a refund, you should contact your insurance company directly. They will guide you through the cancellation process and inform you of any necessary steps or documents required. It is recommended to have your new insurance policy in place before canceling your current coverage to ensure you maintain continuous coverage and avoid any coverage gaps.
Can I switch auto insurance mid-term without incurring any costs?
Switching auto insurance mid-term may involve certain costs depending on the terms of your policy. Some insurance companies may charge a cancellation fee or impose penalties for early termination. It is essential to review your policy documents or contact your insurance company to understand any potential costs associated with switching auto insurance before your policy expires.
If I switch my car insurance, will I automatically get a refund?
Whether you receive a refund when switching car insurance depends on how much of your policy term is left, how you’ve paid your premiums (full vs. installments), and your insurer’s specific policies regarding refunds.
How do I ensure I get a refund after cancelling my car insurance?
To ensure you receive a refund after cancelling, verify the terms of your policy related to cancellations and refunds, cancel formally in writing or through the method specified by your insurer, and follow up to confirm the cancellation and refund process.
What are the typical fees associated with cancelling car insurance?
Fees can vary by insurer but may include cancellation fees or administrative charges. Some insurers may also use a “short rate” cancellation penalty, which subtracts a greater portion of the refund the earlier in the policy term you cancel.
If you cancel your car insurance do you get a refund?
If you cancel shortly after starting a new policy, you might be subject to minimal or no penalties, especially if no claims have been made. However, specific terms can vary, so checking your policy’s fine print is essential.
Is car insurance refundable if I’ve paid in full?
Yes, if you’ve paid your car insurance premium in full and cancel before the end of the term, you’re typically entitled to a pro-rata refund for the unused portion, minus any potential fees.
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Dani Best
Licensed Insurance Producer
Dani Best has been a licensed insurance producer for nearly 10 years. Dani began her insurance career in a sales role with State Farm in 2014. During her time in sales, she graduated with her Bachelors in Psychology from Capella University and is currently earning her Masters in Marriage and Family Therapy. Since 2014, Dani has held and maintains licenses in Life, Disability, Property, and Casualt...
Licensed Insurance Producer
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.