Auto Insurance: Pause Or Stop?

Yes, you can cancel your auto insurance at any time, but there are a few things you should know before you do. Firstly, check your provider's cancellation policy to avoid unnecessary fees and to ensure you don't miss out on any refunds. Most insurance companies will require you to give proper notice, which means informing them that you're cancelling the policy rather than simply stopping payment. Some companies may also ask for a written notice, such as a signed cancellation letter or a completed cancellation form. It's also important to be aware of any cancellation fees, which could be a flat fee or a percentage of your final premium.

If you've prepaid any premiums, your provider should refund the remaining balance. However, this may be subject to a prorated refund, and cancellation fees will usually be deducted from this amount. It's also worth noting that cancelling your auto insurance could result in a coverage lapse, which could increase your future premiums as insurance companies may consider you a high-risk customer. Therefore, it's generally recommended to have a new policy in place before cancelling your existing one to avoid any gaps in coverage.

Cancelling your car insurance policy

Step 1: Purchase a new policy

Before cancelling your current policy, it's important to secure a new auto insurance policy to avoid a lapse in coverage. Driving without insurance is illegal in most states, and a lapse in coverage could cause your insurance rates to increase. Contact your new insurance provider to set up the new policy and ensure it starts on the same day that your old policy ends.

Step 2: Contact your current insurance provider

You can typically cancel your car insurance policy by calling your insurer, contacting an agent through their website or mobile app, mailing in a cancellation request, or speaking to an agent in person. Each insurance provider may have different requirements for cancelling a policy, such as paying a cancellation fee or giving a 30-day notice, so it's important to review their cancellation policy beforehand.

Step 3: Ask to speak with an agent about cancellation

Speaking directly with an agent can help clarify the specific steps and requirements needed to cancel your policy. They can also inform you of any potential costs or penalties associated with cancelling your policy.

Step 4: Sign and send the cancellation letter

Some auto insurance providers may require a signed cancellation letter. This letter typically includes your policy number, your name, and the date you want your policy to be cancelled. If you have prepaid your policy and have remaining coverage, you can also include a refund request for the unused portion.

Step 5: Request a policy cancellation notice

Once your cancellation request has been finalized, your insurance carrier will send you a notice confirming that your policy has been officially cancelled. This notice serves as a written record of the transaction.

Reasons for cancelling your car insurance policy

There are several valid reasons for cancelling your car insurance policy, including:

• Switching insurance providers: If you find a better rate or are dissatisfied with your current provider, you may want to switch to a different insurance company.
• Selling your car: If you sell your car and don't plan on buying a new one, you can cancel your auto insurance policy. However, it's recommended to hold off on cancelling until the new owner takes possession and the title is transferred.
• Moving to a different state: If your current insurance company doesn't offer coverage in your new state, you'll need to find a new provider that operates in that area.
• Reducing coverage: If you have an older vehicle that you own outright, you may consider dropping optional collision and comprehensive coverage. However, this means you'll have to pay out of pocket if your car is damaged or stolen.

Things to keep in mind

• Cancellation fees: Some insurance companies may charge a cancellation fee, which is typically a flat fee or a percentage of the remaining premium.
• Lapse in coverage: Cancelling your policy may result in a lapse in coverage, which can increase your future insurance rates and potentially result in fines from the Department of Motor Vehicles (DMV).
• Refunds: If you've prepaid your premium and cancel your policy before the end of the term, the insurance company may refund the remaining balance, minus any cancellation fees.

Suspending your car insurance

Firstly, you should be aware that not all insurance companies will allow you to suspend your coverage. Some may only permit it in certain situations, such as if you are experiencing financial hardship due to the coronavirus. If you are unable to drive due to illness or injury, or if you are travelling or have been deployed abroad, you may be able to suspend your insurance. However, you will need to check with your insurance provider to see if this is an option for you.

If you are able to suspend your coverage, you will not have to pay for insurance while your car is out of use. This can be a good way to save money, especially if you have alternative transportation. However, it is important to note that your vehicle will not be covered if anyone wants to drive it during the suspension period, and it will not be insured against non-driving problems like fire, animal damage, vandalism or theft. You will also need to file an "affidavit of non-use" with your state's Department of Motor Vehicles to halt state-required auto coverage.

If you have a car loan, suspending your insurance may not be an option for you. Lenders generally require that you maintain coverage for problems such as theft and vandalism. In this case, you may want to consider reducing your coverage instead of suspending it.

Before making any decisions about suspending or cancelling your car insurance, it is important to weigh the pros and cons and to consult with your insurance provider to understand their specific policies and procedures.

Removing yourself from the policy

Removing yourself from an auto insurance policy is a good option if you're going away but others in your household will be driving the car. This option can save you money if you're a riskier driver than the others on your policy because taking yourself off reduces the odds of a crash. However, if it won't save you money, there's little benefit to removing yourself, and it's probably more convenient to stay on the policy. If you're not going away and continue to live with other drivers insured on the policy, this may not be an option. Many companies require all drivers listed at the same address to be included on a policy, or else be specifically "excluded".

To remove yourself from a policy, you may need to provide a letter of intent or complete a cancellation form. You'll typically need to provide details like your policy number, name, and desired cancellation date. Some insurers may also request proof that you no longer live with the policyholder, such as a utility bill or lease agreement in your name at a different address.

Reducing your coverage

Reducing your auto insurance coverage is a good way to save money, especially if you have an out-of-use vehicle. However, it's important to ensure you're still complying with your state's insurance laws, as well as any coverage requirements from your lender. Here are some things to keep in mind if you're considering reducing your coverage:

Keep the Minimum Coverage Required by Your State

Almost every state requires liability insurance, and some mandate uninsured/underinsured motorist coverage, personal injury protection, and/or medical payments coverage. Make sure you understand your state's requirements before making any changes to your policy.

Drop Unnecessary Types of Coverage

If you own an old car that isn't worth very much, you might consider dropping collision and comprehensive coverage. Comprehensive insurance covers non-driving problems such as fire, animal damage, vandalism, and theft, while collision coverage covers damage to your car in the event of an accident. If your car is worth less than 10 times your premium, purchasing this coverage may not be cost-effective.

Increase Your Deductible

You can typically choose how much of a deductible you want to pay when you select your car insurance policy. A higher deductible will result in a lower annual premium. For example, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage cost by 15-30%. Just be careful not to make your deductible too high, as you don't want to be faced with paying more out of pocket than you can afford if you get into an accident.

Shop Around for a Lower Rate

Insurance companies charge different rates for the same coverage, so it's worth getting quotes from multiple insurers to find the best deal. You should aim to get at least three quotes to compare. Additionally, consider bundling your home and auto insurance or insuring multiple vehicles with the same company, as this can often lead to a discount.

Take Advantage of Discounts

Insurers offer a variety of discounts that can help lower your premium. For example, many insurers offer discounts for good students, safe drivers, low mileage, or taking a defensive driving course. Be sure to ask your insurer about any discounts you may be eligible for.

Cancelling your car insurance without a new policy

If you are selling your car, it is usually a good idea to hold off on discontinuing coverage until the new owner takes possession and the title is transferred to them. Check with your local DMV to see if you are responsible for turning in your license plates or if they stay with the new owner.

If you are going on an extended vacation, it is not worth foregoing auto insurance. If you plan to be away for a month or longer and your vehicle will not be in use, there may be other ways to save on your premiums without cancelling your policy.

If you are moving to another state, you will need to get a policy from an auto insurer that offers coverage in your new location. Arrange for the new policy a few weeks before ending your current policy to avoid a lapse in coverage.

If you are experiencing financial hardship, insurers and other financial institutions are likely to be lenient. Many auto and home insurers are willing to work with customers financially affected by the coronavirus. Depending on your auto insurer and state guidelines, payment assistance can take many forms, including pausing cancellations due to non-payment of premiums, special payment plans, and custom payment options on a case-by-case basis.

Frequently asked questions