If you’re trying to trim your monthly budget, you might look at your auto insurance bill and wonder if it’s really necessary. In most cases, the answer is yes — but that doesn’t mean you’re stuck with a particular policy. You are free to switch providers or adjust your coverages anytime you like. In fact, sometimes a few simple changes can drastically reduce your monthly premiums.
That being said, most states won’t let you drive legally without insurance, so you can’t just cancel your insurance outright to avoid that expense. And even if you are switching companies, you’ll want to make sure to wait before canceling your current auto insurance policy to avoid any lapses in coverage. You also need to understand your current provider’s cancellation policy, as well as any state regulations that might affect your decision.
Do I Really Need Car Insurance?
Almost every state requires drivers to have car insurance. There are two exceptions:
- New Hampshire: Drivers in New Hampshire do not have to purchase insurance, but they must prove they have the means to pay for damages after an accident. The easiest way to satisfy this requirement is by purchasing insurance that meets the state’s minimum liability requirements. Otherwise, if you are the at-fault driver in an accident, you will be personally liable for property damage or bodily injuries.
- Virginia: Virginia drivers can choose to pay a $500 uninsured motorist fee rather than purchase insurance. It is important to note, however, that paying this fee does not provide insurance coverage. It simply allows you to drive your vehicle legally without insurance. If you are the at-fault driver in an accident, you will be personally liable for bodily injuries or property damage.
All other states require drivers to carry minimum liability insurance, although exact requirements vary from state to state. Alternatively, some states allow drivers to self-insure via a cash deposit or bond, with amounts ranging from $25,000 to more than $115,000. Even if you can afford this option, it is far less convenient than traditional insurance. You will be left to negotiate claims from other drivers on your own, and the damages could exceed the amount set aside to cover them.
When Can I Cancel My Insurance?
Technically, you can cancel your insurance at any time. However, you should take two very important steps before doing so. First, carefully examine your policy documents for clauses related to cancellation. Your insurance company could require one or more of the following:
- Advance notice: Some insurance companies require 30 days’ notice before you cancel your policy. In that case, your request to cancel will not take effect immediately.
- Written request: Your insurance company might require you to send a written cancellation request. If so, you cannot cancel over the phone, live chat, or email. Instead, you must fax or mail a formal letter.
- Cancellation fee: Most insurance companies do not charge an early termination fee, but some do. Usually, this is a flat fee of $50 or a set percentage of the remaining premium.
Second, make sure you have a new insurance policy lined up, or be prepared to make a cash deposit for self-insurance, pay the uninsured motorist fee, or otherwise meet your state’s financial responsibility requirement. If your state requires drivers to carry insurance, you must avoid having any gap in your coverage.
In many states, insurance companies notify the DMV automatically when you cancel your insurance. If you do not already have a new policy set up, the state might suspend your license, revoke your vehicle registration, or take other legal steps against you. A gap in coverage could lead insurance companies to charge you higher premiums in the future.
How Do I Cancel My Insurance?
The exact steps you must take to cancel your insurance will depend on your provider. In general, though, a phone call to your insurance agent or the company’s customer service center is the best place to start. They will walk you through the process and answer your questions. Plus, having this conversation might cue the company to reevaluate your rates and potentially offer you a better deal.
Will I Get a Refund if I Cancel My Insurance?
In many cases, you can get a refund for prepaid premiums. For instance, if you have already paid six months of premiums but cancel two months into that period, your insurance company might issue a prorated refund for the four months of unused coverage.
If you make monthly premium payments, you are less likely to get a refund. However, your insurance company might refund a portion of your last month’s premium if you cancel in the middle of the month. Check your policy to determine whether your insurance company provides refunds and on what terms. As an example, some insurers will deny a refund if you cancel during the seven- to 10-day grace period between when your payment is due and when the company would cancel your policy for nonpayment.
What Are Good Reasons To Cancel My Insurance?
Even if your state does not require you to carry car insurance, canceling might not be a smart move. However, situations in which canceling your insurance is either wise or necessary include:
- You are moving to a new state. Some insurance providers only operate in certain states, so you might need to cancel your current policy after an interstate move.
- You find a better rate elsewhere. Many factors affect your car insurance rates, and providers weigh those factors differently. You might find significantly better rates by shopping around periodically.
- You are selling your vehicle. Once you no longer own the vehicle, you can cancel its insurance policy.
- You want better customer service. Rates are not the only thing that varies by company. If you have had a poor experience with your current company, especially when filing a claim, you might want to consider switching providers.
Remember that in most cases, you are not simply canceling your insurance — you are replacing it with a new policy from a different provider. Unless you no longer own a vehicle or drive, canceling your auto insurance outright might not be an option in most states. Be careful to avoid a lapse in coverage when canceling your insurance so you don’t face a fine or other penalties.
At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.