Canceling Insurance: What You Need To Know

People may need to cancel their insurance policies for several reasons, including switching providers, no longer owning a car, or qualifying for a special enrollment period. The process for cancelling insurance varies depending on the type of insurance and the company providing it, but generally, people can cancel at any time and it often involves contacting the insurance provider or agent.

Cancelling car insurance

Check with your insurance agent and the DMV:

Each state has different rules regarding car insurance cancellation, so it's important to check with your insurance agent and the Department of Motor Vehicles (DMV) to ensure you comply with the applicable laws. For example, some states require you to surrender your license plates before cancelling your insurance, even if you're moving to a different state. Understanding the specific requirements in your state will help you avoid fines and other issues.

Purchase a new policy before cancelling your existing one:

To avoid a lapse in coverage, which could result in increased insurance rates, it's recommended to secure a new auto insurance policy before cancelling your current one. This is especially important because driving without insurance is illegal in most states.

Contact your insurance provider:

There are several ways to do this, depending on your carrier's options. You may be able to call your insurer, use their mobile app or website, mail in a cancellation request, or speak to an agent in person. It's a good idea to ask to speak with an agent to clarify the specific requirements and steps for cancelling your policy.

Be prepared to provide the necessary information:

When cancelling your policy, you may be required to provide certain information, such as your policy number, name, and the date you want your policy to be cancelled. If you have paid for your policy upfront, you may also want to include a refund request for the unused portion.

Sign a cancellation letter:

While not as common as it used to be due to the convenience of digital communication, some auto insurers may still require you to sign and submit a cancellation letter. This letter typically includes your policy number, name, and the desired cancellation date.

Request a policy cancellation notice:

Once your cancellation is finalized, your insurance carrier will generally send you a notice confirming that your policy has been cancelled. If you don't receive this notice, be sure to request one from your insurer to ensure you have written confirmation of the cancellation.

Reasons for Cancelling Car Insurance:

There are several reasons why you might need to cancel your car insurance policy. Here are some common scenarios:

• Selling your car: If you no longer own the car, you may want to cancel your insurance policy. However, it's recommended to wait until the new owner takes possession and the title is transferred before discontinuing coverage.
• Moving to another state: Different states have different insurance requirements, so if you're moving, you'll need to ensure your insurance complies with the laws of your new state. In some cases, you may need to switch to a new insurance provider if your current one doesn't offer coverage in that state.
• Switching to a different insurance provider: If you find a better rate or prefer a different insurance company, you may want to cancel your current policy. Just be sure to have the new policy in place before cancelling the old one to avoid a lapse in coverage.
• Reducing coverage: If you have an older car that is paid off, you may consider dropping optional collision and comprehensive coverage to save money. However, this means you'll have to pay out of pocket if your car is damaged or stolen.

Remember, while you can cancel your car insurance at any time, it's important to carefully consider your reasons for doing so and create a strategic plan to avoid legal and financial issues.

Cancelling health insurance

Know When to Cancel:

Firstly, it's crucial to understand the timing of your cancellation. If you have self-only or family coverage purchased through the individual health insurance market, you can generally cancel your plan at any time. However, selecting a new health plan typically happens during open enrollment, which is usually from November 1 to January 15, but this can vary depending on your state. Therefore, if you cancel outside of this period, you may have to wait for the next open enrollment period to choose a new plan, unless you qualify for a Special Enrollment Period.

Understand Special Enrollment Periods:

Special Enrollment Periods are triggered by specific life events, such as starting a new job with different health benefits, turning 65 and qualifying for Medicare, losing health coverage, moving, getting married, having or adopting a child, or if your household income falls below a certain threshold. These periods usually last for 60 days from the date of the qualifying event, allowing you to cancel your current plan and choose new coverage.

Contact Your Insurance Provider:

To initiate the cancellation process, get in touch with your health insurance marketplace or insurance company. If you have a state or federal Marketplace plan, you can typically cancel by logging into your account and terminating the coverage. Alternatively, you can call their customer service team for assistance. For privately purchased plans, contact your insurance company directly using the phone number provided on your policy, health insurance card, or premium bills.

Follow Cancellation Protocols:

Each health insurance company has its own cancellation protocols that you must follow. During the cancellation process, an insurance representative will guide you through the necessary steps, which may include confirming policy end dates to avoid gaps in coverage. Make sure to take note of the representative's name and any cancellation confirmation numbers for future reference.

Ask About Premium Refunds:

If you have paid in full for a one-year individual policy and decide to cancel before its end date, inquire about a premium refund. Many insurance companies will reimburse you for the remaining monthly premium payments for the unused portion of your policy. Don't forget to check your bank statements after your new coverage starts to ensure the cancellation has taken effect and that your new policy is active.

Understand Your Rights:

Familiarize yourself with your state's health insurance cancellation laws and consumer protection laws. These laws cover various aspects, including health coverage requirements, prompt payment of claims, access to specialists and medical care providers, and coverage of specific treatments. Additionally, know that your insurance company cannot cancel your coverage for an honest mistake on your application but can do so for providing false or incomplete information. They must also notify you at least 30 days before cancelling your coverage due to overdue premiums, giving you time to appeal or find alternative coverage.

Cancelling insurance over the phone

Step 1: Contact your insurance provider

Different insurance companies may have varying methods of communication, such as calling their customer support number, using their mobile app or website, or speaking to an agent in person. Be sure to have your policy details and personal information ready when initiating contact.

Step 2: Ask to speak with an agent about cancellation

Speaking directly with an agent is advisable to understand the specific steps and requirements for cancelling your policy. They can guide you through the process and address any concerns or questions you may have.

Step 3: Understand the cancellation requirements and procedures

Insurance providers may have different requirements, such as providing a cancellation letter, paying a cancellation fee, or giving advance notice before your intended cancellation date. Be sure to clarify these requirements with the agent and confirm the effective date of cancellation.

Step 4: Follow the cancellation steps provided by the agent

The insurance agent will outline the steps necessary to cancel your policy. Pay close attention to their instructions, and don't hesitate to ask for clarification if needed. Make sure to take note of the representative's name and any relevant confirmation numbers for future reference.

Step 5: Request a policy cancellation notice

Once your cancellation is finalised, your insurance carrier will typically send you a notice confirming the cancellation. If you don't receive this confirmation, be sure to request it from your insurer to ensure you have a written record of the transaction.

Step 6: Confirm your cancellation

After following the steps provided by the agent and receiving the policy cancellation notice, your insurance policy should now be successfully cancelled. It is always a good idea to double-check with the agent to confirm that all necessary steps have been completed.

Remember, it is essential to understand the implications of cancelling your insurance policy and ensure that you have alternative coverage in place, especially for health and car insurance, to avoid any lapses in coverage that could result in legal or financial risks.

Getting a refund after cancelling insurance

Cancelling your insurance policy can lead to higher rates if you don't have another policy in effect. This is because insurance companies may consider you a high-risk driver if you have gaps in your insurance coverage. Therefore, it is important to secure a new insurance policy before cancelling your existing one.

If you paid your premium in advance and cancel your policy before the end of the term, the insurance company might refund the remaining balance. Most auto insurers will prorate your refund based on the number of days your current policy was in effect.

The insurance industry is highly regulated, and each state has insurance statutes that govern how companies must handle refunds. In Nebraska, for example, an auto insurer must contact you within 15 business days of cancellation to inform you about any eligible refunds. In many states, like Texas, if you finance your premium through a premium finance company, the insurance company may return the unused premium to the finance company, not you.

Unless otherwise stated in a statute, auto insurance companies usually do not have the obligation to refund your money within a given time period. Most insurance contracts typically state that the company will issue a refund within a reasonable timeframe. To avoid refund headaches, it is best to notify your auto insurer of your plans to cancel when it is almost time to renew. Check with your carrier before cancelling to learn more about its insurance cancellation policy.

Depending on the auto insurance company, cancelling your policy before the end of its term may result in a cancellation fee. State laws can determine if a fee is allowable. If so, it is up to the insurer to set that fee, which is often taken out of the prorated refund.

There are two types of cancellation refunds: pro-rata and short-rate cancellations. With pro-rata cancellations, you’re refunded the full unused portion. With short-rate cancellations, the insurance company decides the terms of cancellation and can keep a portion as a penalty.

You can get a refund after cancelling insurance in the following scenarios:

• You’ve already paid for the policy in advance.
• You’re switching car insurance companies.
• You’re selling your car.
• You’re reducing coverage.

You likely won’t get a refund if:

The insurance company cancelled the policy because of non-payment, fraud or another reason.

Reasons for cancelling insurance

There are many reasons why someone might cancel their insurance policy. Here are some of the most common reasons:

Non-payment of premiums

The most common reason for insurance cancellation is non-payment of premiums. This can happen if you forget to pay your bill, or if you're unable to keep up with the payments due to financial hardship. It's important to note that if you cancel your insurance policy for non-payment, you may be subject to cancellation fees and your future insurance rates may increase.

Too many missed payments

In addition to non-payment, having too many missed payments can also lead to insurance cancellation. This usually occurs when you've made multiple late payments or have a history of non-payment.

Change in situation

If there is a significant change in your situation, such as getting married, divorced, or moving to a new state, your insurance company may cancel your policy. This is because your insurance rates are often based on your marital status, location, and other factors.

Criminal record or false declarations

If you have a criminal record or have made false declarations on your insurance application, your insurance company may cancel your policy. This is because insurers view these as high-risk factors that could increase the likelihood of claims being made.

Home in disrepair

If you own a home and it falls into disrepair, your insurance company may cancel your policy. This is because a home in disrepair is considered a higher insurance risk, as there is an increased chance of damage or loss occurring.

High number of claims

If you've made a high number of claims in a short period, your insurance company may view you as a high-risk customer and cancel your policy. This is especially true if the claims are related and occur at the same address.

Moral risk

In some cases, insurance companies may cancel policies if they believe the insured individual poses a "moral risk". This could be due to factors such as a history of drug or alcohol abuse, or if the individual has a criminal record.

Intentional damage

If you intentionally damage a covered asset, your insurance company may cancel your policy. This type of cancellation usually occurs when the insured individual is found to be at fault for the damage.

Switching insurance providers

Many people choose to cancel their insurance policy when they find a better deal with another insurance provider. It's important to note that you should always have another policy in effect before canceling your existing coverage to avoid a lapse in coverage, which can increase your future insurance rates.

Frequently asked questions