Indeed, times and situations change, so do your needs for car insurance. Say you want to sell your current car, are moving to a different province, or want to switch to another insurance carrier. These events could change your insurance needs—lower coverage limits, more people to your policy, or no coverage at all. Whatever your reason is, canceling your existing auto insurance policy should be quite straightforward—and the transition should be smooth.
Learn more about how to cancel your car insurance, the right time to do it, the pitfalls to avoid, and how it differs from non-renewal.
How to Cancel Your Car Insurance Policy
Letting your insurance policy cancel without proper notification may cause problems. Purchasing and agreeing to a new policy doesn’t exempt you from your old bill, so you should not assume that your old policy has terminated just because you’ve switched to a new insurance carrier.
Depending on your insurer’s rules, here are the various ways you can cancel your auto insurance policy.
1. Call Your Insurance Carrier
Arguably the quickest way to cancel your insurance policy is by calling your insurance representative or agent. You’ll probably find their number on the company’s website or your insurance card. And while a phone call may be only what you need to cancel, most insurance providers require you to sign off your policy documents.
If you’re canceling your policy based on the price, it’s a good idea that you first speak with your agent regarding the same. You could be eligible for discounts or your insurer could have changed the pricing on your current policy.
2. Mail or Fax Your Cancellation Request
Although this may be a little old-fashioned, mailing or faxing a cancellation letter may quickly seal the deal when you need to cancel your policy. A letter with your full name, policy number, current date, and the date you’d like the cancellation to take effect will sufficiently initiate a cancellation. Be sure to sign the document, otherwise, your request may not be processed.
If you had paid for your insurance policy upfront and your coverage still has a few months before it lapses, you may also include a refund request for the unused part of the policy.
3. Visit Your Insurer’s Office
Car insurance companies and agencies lose their clients from time to time, so you shouldn’t be afraid to walk into their offices to ask for policy cancellation. Of course, your current agent or representative may try to persuade you, but a polite decline should seal the deal. Sign the policy cancellation form and your coverage will be terminated.
4. Let Your New Insurance Company Assist
Sometimes, canceling your insurance policy is as simple as asking your new insurance representative to do it. Your new representative will need your old policy number, the dates, and your signature on the cancellation forms. This can be a good way to avoid any awkwardness with the insurance company you’re leaving behind.
Be sure you understand the fine print before moving forward with any of the actions above. Some insurance companies may have special requirements you must fulfill to cancel your policy.
Most insurance companies won’t charge you for canceling your policy but others may charge a policy cancellation fee. You may also need to pay a short rate fee, which is typically 10% of the premium balance for your policy period. For instance, if you had taken out a 12-month policy and canceled after the 8th month, you’d owe 10% of the premium you’d have paid for the remaining 4 months.
Some insurance companies may also require you to serve them with a 30-day notice period to cancel your policy. In this case, it’s important to ensure that your coverage with the new company is active before initiating a cancellation with your old insurance company. This helps ensure there are no gaps in coverage.
When To Cancel Your Car Insurance Policy
Your reasons to cancel car insurance may be justified, but you should bear in mind that you will be without coverage thereafter. If you’re switching to a new carrier, it’s advisable that you obtain coverage before your current policy expires. If you’re canceling your policy for good, speak with your insurance representative for clarity on whether missing coverage will put you at financial or legal risk.
- When you relocate. If your current insurance company does not provide auto insurance coverage in the province you’re moving to, you’ll need to cancel your policy with them and purchase a new policy from a carrier that covers your new region. Be sure to arrange for new coverage in advance to avoid gaps in coverage.
- You have no car. If you have sold your car and don’t intend to get back behind the wheel, then you can cancel your current insurance policy. However, wait until the title has been transferred and the new owner takes full possession of the vehicle. Remember, if you buy a new car, you’ll need proof of insurance to complete your vehicle’s registration with the department of motor vehicles.
- To reduce coverage. If your car is already old, you might consider dropping comprehensive coverage and other riders for smaller third-party coverage. Indeed, this will help you reduce coverage, but don’t forget to take into account the risks of the same. For instance, you’ll pay for the costs of damage and repair out-of-pocket if your car is involved in an accident.
- You’re eyeing a better deal. You may cancel your policy with your current insurer because you want a better deal from another insurer. Sure, there’s nothing wrong with following a better deal on your coverage, but again, you should have your new policy in force before canceling your current policy.
Auto Policy Cancellation vs. Non-Renewal
Choosing not to renew your current policy differs from an insurance carrier canceling your policy. You are at liberty to cancel a policy at any point, but you’re bound by the terms and conditions in your contract.
Auto policy cancellation simply means termination of the auto insurance policy, which can be done by either the insurance company or the policyholder before coverage lapses. Usually, policies that have been in force for 60 days or more won’t be canceled, except for reasons like:
- Suspension or revocation of your driver’s license.
- Non-payment of premiums.
- The discovery of fraud or misrepresentation of information
However, mid-term policy cancellations can be permitted when a notice is sent 20 days before the effective cancellation date, or 15 days if the cancellation is as a result of unpaid premiums. With auto policy cancellation, your auto insurer must provide a notice giving clear reasons for the termination.
If you cancel your policy prior to its next renewal date, some insurance companies will determine the refundable premium on a short-rate basis. This implies that your insurer retains a larger portion of the premium—you’ll receive about 10% of the unused portion of your premium. This practice helps insurance carriers cover the administrative expenses arising from policies that don’t run for their full term.
Policy non-renewal is different altogether—it means the refusal to continue with the coverage either by yourself or the insurer. Non-renewal usually occurs after your policy has run for a year or so. At the end of a 12-month period, your insurer must renew your policy for another year unless it serves you a 45 to 60 days’ notice of its intent not to renew you for coverage. The written notice must clearly specify the reasons for not renewing the policy. For instance, your insurer may choose not to renew you for coverage if you had filed many claims in the ending policy year.
When Can Your Insurer Cancel Your Policy?
Unlike non-renewal that will only occur at the end of your policy term, policy cancellations can happen at any time. Usually, an insurance company can terminate your policy for any reason within the first 60 days of being active. However, if your policy has been in force for over 60 days, your insurer must have grounds for canceling your policy. These may include:
When you stop paying premiums
Your auto insurance policy is no different from other services and utilities you pay for. If you stop paying your car insurance premiums, an insurance company will cancel your policy. Most companies will give you a grace period within which you can make your premium payment. If your payments are up-to-date during this period, your policy will remain in force.
When you drive under the influence (DUI) or drive when impaired (DWI)
Driving under the influence or driving when impaired are two offenses that commonly lead to the suspension or revocation of your license. If this happens to your license, then your insurer has a right to cancel your auto policy.
When is Canceling Your Car Insurance a Bad Idea
Sure, you can cancel your car insurance policy at any time, but there are instances when terminating coverage is a bad idea. Take time to assess why you’re canceling your car insurance coverage and whether you could be exposing yourself to financial and legal risks.
When moving to a state that doesn’t require car insurance
Canadian provinces and territories require that drivers carry mandatory coverage in the form of liability insurance and accident benefits or bodily injury insurance. Some provinces may mandate more coverage than others. If you move to a territory that only requires you to carry the mandatory coverage, you may be tempted to drop or cancel the additional insurance policy, say collision coverage. However, be warned, just because your province doesn’t mandate it does not make it inferior. You could cancel a policy and end up being on the hook for someone else’s property damage or hospital bill.
When your car is in storage
You could be tempted to cancel your policy if you put your car away in storage for a long period, but this isn’t a smart idea. First, as long as the car is registered, you should be able to provide proof of insurance at any time. Besides, being in storage doesn’t really mean your car is immune to damage. Weather hazards, falling objects, or vandalism could damage your vehicle, and if you had dropped comprehensive coverage, you’ll need to cover the costs to repair or replace any damaged parts.
Dropping coverage because your car is in storage could create a gap in coverage. If an insurer notices a gap in your past coverage, you’ll likely receive quotes with higher premiums for a new policy.
When you hardly drive
Whether you drive frequently or barely get behind the wheel, auto insurance is mandatory. In fact, you should be able to provide proof of insurance whether you’re on the road or not. Your vehicle could be vandalized while sitting on your driveway, and an auto insurance policy could offer financial protection if you need to recoup your losses.
Will You Get a Refund After Cancelling Your Car Insurance?
If you no longer want to continue driving your vehicle, are moving to a new territory, or are selling your vehicle, you’ll likely want to proceed with a policy cancellation as well. You may claim a refund if you cancel your policy before it expires. Indeed, insurance refunds are nice, but will you always get a refund?
Insurance refunds can be a result of many reasons. The further in advance you paid for your policy, the higher your chances of receiving a refund should you terminate your policy. For instance, if you paid your annual premium upfront and then terminated coverage six months into your policy, you will be refunded for the unused premium. Auto insurance refunds are pro-rated, so your rate is usually calculated by day and you should receive a refund for any prepaid unused days.
If you pay monthly premiums and cancel your policy at the end of the billing cycle, you obviously won’t get a refund. However, if you terminate your policy mid-month, you may receive a small refund. You’ll generally receive your refund through the same payment method you use to pay for your policy.
You’re eligible for a refund even when an insurance company terminates your coverage, except if it was on grounds of non-payment.
Conclusion and Recommendation
You may cancel your auto insurance policy to go for the best rates, bundle your insurance products, or sell your car. Whatever your reasons are, be sure to follow the due process. If you don’t alert your insurance carrier or stop paying your premiums, you could incur a penalty in the form of cancellation fees. Your insurance company could also continue billing if you’ve set automatic payments from your bank or credit card.
If you’re terminating your policy but still have plans to continue driving, ensure you have a new policy in force before canceling your old policy. It’s important that there are no gaps in coverage since that could cause headaches when you need a new policy.