Early Cancelation of Your Auto insurance Policy: Is it worth it?

An auto insurance policy is as essential for your car as gas; you can own a car but you cannot drive it. It is required by the government to have proper liability coverage in almost every state in the US (except New Hampshire and Virginia). You can get into legal trouble if you drive a car without liability coverage. In 12 states, called “no-fault” states, you need to have a personal injury protection plan as well. 

Auto insurance is important, even the optional ones. Collision and comprehensive coverage are some of the most important and popular optional auto insurance policies in the market. But there are times when you’d want to drop a few policies or even cancel all your auto insurance policies.

The difficult part here is knowing how to do it, and why to do it. If done in the wrong way, it could cause you to spend a lot more. So here’s everything you need to know about the early cancelation of your car insurance policy. When to do it, and when to avoid it. Let’s get started.

Early Cancelation of Auto Insurance Policy: The Problems

Canceling your vehicle insurance policies early can be a problem if your auto insurance company has some terms and conditions regarding it. The process of canceling your policy can also be simple or complicated depending on your car insurance company.

When it comes to early cancelation, two problems sit at the front desk. The first is that you might have to go through a lot of emails, and requests, and share other details. The second is that your auto insurance policy might get canceled, but the refund might take forever to be processed. Many companies specifically state in their terms and conditions that the refund might take an “indefinite” amount of time.

How to Cancel Your Car Insurance Policy

While in the old days you’d have to contact your auto insurance company, visit their offices, contact your insurance agent, right a formal letter, and do a couple of tedious things to cancel your policy, with the power of the internet and the convenience of a smartphone, putting in a cancel request takes only a few minutes. You can cancel your old policy and get a new, better vehicle insurance policy in a matter of minutes!

So to cancel your auto insurance policy, all you need to do is either open your auto insurance company’s application or just contact their customer service representative. Put in a formal request and the company might ask you to send an email to them with all the important information such as your name, policy number, and perhaps the reason why you are canceling your policy. Just hit send and you have officially put in the request. Now all you’d need to do is wait for their response.

Auto insurance companies usually take around a week or so to respond and follow up on your request. But recently we have seen a faster response time. Progressive, Geico, and Allstate have some of the best response rates in the industry. 

While these data are from general sources, it is always better to contact your auto insurance company and ask them about the process of canceling the policy. Some companies might need you to give a one-month notice period before canceling while some companies might charge you a cancelation fee. 

If you cancel your policy early, i.e., before the end of your policy period, your rates will be calculated on a pro-rata basis. Based on that, whatever time is left for your policy will be converted and refunded to you. 

Why Cancel Your Policy Early? 

Now that you know how to cancel your auto insurance policy, let’s look at all the possible reasons why you would need to cancel your car insurance policy before the policy period. 

Changing States

One of the most common reasons why people cancel their auto insurance policy before time is because they change states. While some major companies have branches all over the country, many auto insurance companies are limited to only a few states.

So if you are moving to a new state and your current insurance company does not have a branch there, then cancel your current policy. But, before you do so, make sure that first, you have a new active policy. You do not want to have a car registered to your name and no active auto insurance policy. 

You Found a Better Company

Perhaps in the rush of getting auto insurance, you might have made a hasty but wrong decision. And later, after finding out about a great auto insurance company, you are considering switching. This is another common reason why people cancel their policy.

You Need to Drop a Few Policies

You don’t always need to have all the auto insurance policies. For example, if your car gets very old, you can drop collision and comprehensive coverage. It is better to fix old cars yourself rather than getting expensive optional policies, paying deductibles and insurance premiums, and going through the hassle of insurance claims. 

You Don’t Need a Car

Sometimes operating a car is more expensive than buying a car. And with the ever-rising price of gas, it’s no shocker that many people are ditching their cars for public transportation. If you are one of those people who want to sell their car and not buy one for a long period of time, then you might want to cancel your policy as well. Just do it after you have properly sold your car and not before as it could lead to insurance gaps which would raise your insurance rates in the future.