Always have a new policy in place before canceling your old auto insurance coverage. You don’t want to have a lapse in car insurance for even one day. You would not be covered for any accident that might occur, and your old company may report your expired policy to the state, which may penalize you. Your new company will be able to time the onset of your new policy to coincide with the cancellation of your old coverage.
All standard auto insurance policies give you the right to cancel your policy at any time, once proper notice is given to the insurance company. You don’t need to wait until renewal. If you choose to cancel in the middle of a cycle, the company will prorate your latest premium payment up to the cancellation date and return the remainder to you.
Some states have laws that prevent a cancellation during the first month or 60 days (to keep drivers from buying a policy to meet registration or license requirements and then quickly cancelling). But there are exceptions:
- You can show proof that you obtained another car insurance policy with a different insurer, or
- You no longer own the vehicle that you insured on the policy
Unfortunately, some car insurance companies may charge a special “short rate” cancellation penalty if you cancel in the middle of a policy term, so be sure to ask before you switch. If they do charge a penalty (it’s often 10 percent of the unspent premium amount), you’ll need to decide if the better rate outweighs the fee you’ll pay.
Insurance companies advertise that you’ll save 15 or even 20 percent by changing to them, but you may also lose your current insurance company’s loyalty discounts, which can be as high as 25 percent. There are also other auto insurance discounts, including bundling policies, earned accident forgiveness, future renewal discounts, and other benefits that grow with or depend on the amount of time you maintain a policy with that car insurance company.
On the plus side, many car insurance companies also offer a “transfer discount” or new-customer discount, typically 5 percent, to help offset these costs, but you’ll want to weigh what the change will mean to your car insurance’s cost.
Generally, you need to cancel your auto insurance policy in writing. Send a letter to the company’s customer service address with the following information:
- Your name, printed or typed
- Your full address
- A request to cancel your policy, giving the policy number and effective date of cancellation.
- A reason for the cancellation, such as “I have bought a new policy” or “I have sold the insured vehicle.”
- The name of your new insurance carrier and the policy number.
- Your signature
- Date of signature
Here is a downloadable cancellation form you can print and send to your old insurance company.
If you have a local agent through a company, such as State Farm or Farmers, you may be able to call and cancel. If you have a policy through an online insurer, such as Geico or Progressive, you may be able to cancel through the company’s online policy management system. The company may ask for information about your new car insurance policy.
Your prior carrier may want a copy of the declarations page from your new policy.
If you’ve sold a car, you may be asked to provide a bill of sale.
Most states’ insurance laws actually require the company to confirm that you have a new policy for your car before cancelling your old policy. The reason is that most insurance companies have to report policies that are cancelled to the state insurance department, so the state can keep track of uninsured drivers. This helps reduce the number of uninsured drivers. If they let you cancel your old policy without proof that you had a new policy, they’d have to report you as uninsured.