Free Car Insurance Comparison

Compare Quotes from Top Companies and Save

When can I cancel my car insurance?

Here's what you need to know...
  • When you enter into an indemnity contract with an insurer, it’s your right as the main policyholder that you can cancel your insurance at any time
  • If you sell your vehicle, it’s important to contact your insurer to cancel your insurance before the next automatic payment comes out of your account. You will need to provide the date of sale if the cancellation needs to be backdated
  • When you switch insurance companies or you move your insurance to another state, be sure to request the cancellation to be processed as of the effective date of your new policy. This will ensure that you avoid lapses
  • Some insurance companies will ask for proof that you purchased coverage elsewhere if you request your cancellation to be processed days or weeks before you make contact with your agent
  • Many insurance companies charge cancellation fees if you terminate your contract early. If you sell your only car or you move to another state, the fee may be waived

If you’re thinking about canceling your auto insurance, it’s important to check the consequences before you make the call. By law, all personal car insurance policyholders have the right to cancel their insurance coverage at any time.

This right is granted under each state’s Consumer Bill of Rights, which insurers must give you a copy of when you purchase coverage.

While canceling your coverage at any time is a possibility, it’s important to time your request right to avoid penalties. If you go uninsured for even just a few days, that mistake could cost you hundreds in the form of penalties or thousands if you have an uninsured loss.

Start comparing car insurance rates by using our tool above!

Can both parties cancel the contract at any time?

AdobeStock_40672072-1600x1600

Auto insurance is an indemnity contract. When you apply for coverage and the insurer extends an offer, you accept that offer by entering into the insuring agreement and making your first payment to start coverage.

Under contract law, there are only certain scenarios when an agreement can be terminated. Lucky for you, indemnity contract law works in your favor.

As the owner of the insurance policy, you have the legal right to cancel your insurance at any time. This is a rule because the insurance marketplace is a competitive one.

All consumers in this marketplace can shop around and look for competitive rates at any time.

Insurance companies have the right to terminate the contract, but only for a small window of time.

When can the insurance company cancel a contract?

The insurance carrier has the right to cancel a new application before it’s been issued. This is referred to as either the 30-day or the 60-day binding period, depending on the state that you live in.

After the binding period has passed and the policy is fully underwritten, there are only a few reasons that a policy can be canceled midterm. These include:

  • Failure to make premium payments
  • Suspension or revocation of your driver’s license
  • Disability that makes the insured unable to drive
  • Fraud or misrepresentation

Free Car Insurance Comparison

Compare Quotes From Top Companies and Save

Reasons a Policyholder Can Cancel Their Insurance

Only the named insured on the contract has the authority to cancel the contract. If you are the named insured, you can terminate your rights under the contract for any reason while it’s active.

Sometimes cancellations can wait and other times they can’t. Here are some examples of valid reasons you should request a cancellation:

  • You sell the only vehicle that you own and don’t plan on buying another vehicle
  • You move out of state and you need to active coverage with a licensed carrier that does business in your new state of residence
  • You’re no longer licensed to drive and are transferring your vehicle to a friend or family member
  • You’re moving out of the country and taking your vehicle with you
  • You’re taking your vehicle off of the road and turning in your plates
  • You have purchased auto insurance with a new carrier

Timing Your Cancellation

If you time your cancellation right, you shouldn’t have any issues after you cancel your coverage.

If you’re not sure when you should request the cancellation, there are a few rules depending on the situation. Here are some tips that can help you avoid canceling your insurance too early or too late:

  • If you buy auto insurance elsewhere, cancel the coverage effective the date the new coverage starts
  • If you move out of state, don’t cancel your coverage until you’ve purchased a new policy
  • If you don’t plan on driving your car, don’t cancel your insurance until you’ve turned in your plates. If you want comprehensive coverage to protect your vehicle, keep your insurance active and suspend everything but comprehensive
  • If you sell the car or transfer ownership to a friend, don’t cancel your insurance until you’ve notified the DMV and released your liability

When can you backdate a cancellation?

AdobeStock_58145823-1600x1600

Insurance companies can’t charge you for insurance if you’re paying for coverage elsewhere. There’s also a requirement that says that you must have an insurable interest in the property to insure it.

This is why you can backdate your cancellation when you have a new policy in force or when you no longer own the car.

The insurer will go back to the date after the inception of a new policy. If you sell the car, the backdate cancellation will go back to the date after the sale.

If it is more than a week or so, the company may ask for proof of coverage or the bill of sale as evidence of the change.

Do you have to pay a fee to cancel your insurance?

Some carriers charge a fee to process an early cancellation. This is called a short-rate cancellation.

The fee may be waived if you’ve sold your car or you’re moving to a state where the company doesn’t operate. Check your contract to see what your fee will be before you switch.

If you want to find a more affordable plan, now is the time to shop around. Use an online rate comparison tool to find out if you’re paying a fair price. If you find a better deal, it might make the most sense to switch your coverage now.

Enter your zip code below to access car insurance rates from multiple providers!

Free Car Insurance Comparison

Compare Quotes from Top Companies and Save