Making a payment to that auto insurance company every month is expensive. Sometimes, you may feel that you're not receiving anything for that large premium. The temptation to save money and cancel the car insurance policy might be overwhelming.
But you should resist temptation. Although you can cancel your car insurance policy, the consequences can be more expensive than the premium.
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Consider also: How to Lookup the Insurance Policy for My Car
Cancelling Auto Insurance
Auto insurance can be expensive. But before you cancel insurance, speak with an insurance agent. She'll advise you as to what the ramifications are. If you still want to end your current policy, notify your insurance agent or current insurance provider.
Some auto insurance companies require a 30-day notice. Depending on your insurance provider, you may have to pay a cancellation fee if you cancel before the policy term has ended. In addition, some insurance companies require a percentage of your future premium.
If you have paid in advance, inquire if you can get any unused premium back. You may not receive all of your money back since you might have a cancellation fee.
Consider also: What is "Liability Only" Car Insurance?
Legal Consequences of Cancelling Car Insurance
Although legally, whether you have collision or comprehensive car insurance on your vehicle doesn't matter, liability is different. Depending on your state, the Department of Motor Vehicles (DMV) could revoke your car's registration if you have canceled your liability car insurance.
And if you are involved in an accident without car insurance, you will be fined and possibly lose your driver's license or face fines, penalties and jail time, depending on state laws.
If a financial institution has the note on your car, legally, they have the right to repossess your car if it's not properly insured.
If you are canceling your old policy because of high insurance premiums, you might be in for a surprise when you try to get new insurance later. This is because the insurance rates on your new policy will probably be higher.
An insurance provider may even refuse to insure you because of the lapse in coverage.
Discuss this with your current insurance agent before deciding to cancel with your current insurance provider.
Although you can cancel your car insurance policy, the consequences can be more expensive than the premium.
Insurance Company Cancels Auto Policy
Sometimes you're just short on cash. An insurance cancellation for non-payment is inevitable if you stop making your premium payments.
You'll receive an insurance cancellation letter. The cancellation process usually gives you a 10- to 20-day grace period before your current insurer will cancel coverage.
A policy cancellation due to non-payment could hurt your credit score if your old insurer reports you.
Consider also: Does Cancelling Car Insurance Affect Your Credit Score?
Alternatives to Cancelling Auto Insurance Policy
If you're not driving your car or going on an extended vacation, you may not want car insurance coverage. Canceling all your coverage might not be the right idea to save on car insurance premiums. Instead, talk to your insurance agent about reducing coverage while not driving.
You'll still have car insurance without the full, higher premiums. Another alternative, whether you're driving or not, is paying a higher deductible. A higher deductible will give you a lower premium.
If high insurance rates are the problem and you want a better rate, investigate other insurance companies to get a lower rate. Then, make a phone call to your insurance agent, discuss your options and look for new coverage with a lower rate.
- Bankrate: When and How to Cancel Your Car Insurance Policy
- Business Insider: You Can Cancel Your Car Insurance to Save Money While You’re Not Driving, But You’ll Probably Want to Reduce Coverage Instead
- Insurance Information Institute: 9 Ways to Lower Insurance Costs
- Car and Driver: What Happens if Car Insurance is Cancelled?
- Forbes: When Can Your Car Insurance be Canceled
- Value Penguin: When and How to Cancel Car Insurance