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Can you cancel your car insurance if you pay monthly payments?

Important facts to know...
  • Drivers are required to maintain auto insurance in almost every state
  • Most car insurance companies offer flexible payment plans and options
  • You have the right to cancel your car insurance but you may be charged early termination fees or a fee for a short-term policy
  • Some drivers cancel their current policy if they have found a better rate on a different one

Drivers are legally required to carry insurance on their vehicles in almost every state in our nation. However, there may come a time when a driver needs or wants to cancel their insurance.

Such is the case if they have found a cheaper insurance policy. You can ensure that you are paying the best possible price for your auto insurance premium by using an online price comparison tool. Try our free tool today!

Auto Insurance Requirements

If you own a vehicle, you are required to obtain auto insurance for it and maintain continuous coverage at all times. There are only a handful of states with exceptions to this rule as almost anywhere you live will this legal requirement.

The cost of auto insurance should be considered into your budget for operating your vehicle. You should check with your state regarding the minimum auto insurance coverage amounts and whether or not you can prove the financial ability to pay for an accident in other ways.

Most states take their car insurance requirements very seriously, so much that there are strict penalties in place for drivers who, for whatever reason, choose not to abide by the law when it comes to auto insurance requirements.

Each state has set their own laws regarding the penalties and they will likely include all or most of the following:

  • Fines
  • Imprisonment
  • Car impoundment
  • Community service
  • Car registration suspension
  • Driver’s license suspension

Car Insurance Payment Options

Although car insurance may be an extra drain on your budget, thankfully, most car insurance companies offer convenient payment plans. You can pay your auto insurance in monthly installments or up front for a six-month or 12-month policy.

Keep in mind that many auto insurance carriers will offer a discount if you choose something other than their monthly installment plan. You can talk to your carrier about what options might be available to you in order to help manage your payments.

Can you cancel your car insurance if you pay monthly payments?

As a consumer, you have the right to cancel your car insurance policy at any time for any reason. However, it is important to keep in mind that you are legally required to have car insurance at all times.

If you become unhappy with your car insurance company, feel that you are being treated unfairly, or have found a better price, you will need to let your current carrier know when to cancel your policy. Be sure your new policy starts as soon as the old one ends.

You should also be aware that canceling your policy prior to the end of the policy period may cost you more as the car insurance company may charge you for a short-term policy.

Check the General Provisions section of your policy documents to determine how your carrier will handle an early cancellation of your policy.

If you are canceling because you no longer own a vehicle, you may need to show proof such as surrender plates and tags.

As far as payments go, depending on when you cancel, you may still owe your auto insurance carrier or they may even owe you. The company should prorate your remaining premium.

You will be given a certain timeframe in order to pay whatever you still owe them or your account may be sent to collections. If they car insurance carrier owes you after you cancel your policy, they should cut you a check within a few weeks.

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Coverage Types

Car insurance policies actually have several mini-policies rolled into one to make up your total coverage. If you will be comparing different policies, it is imperative that you make sure you are comparing the same policy types.

Here are the various types of coverages that can be found on a car insurance policy:

– Liability

Bodily injury liability covers medical bills and funeral expenses when needed for the damages you are at fault for. Property liability pays for damages to other people’s property that you have caused in an accident.

Liability coverage is a minimum car insurance requirement in most states. Drivers should remember that liability only covers damages that they cause to others and not any of their own damages.

– Uninsured/Underinsured

Even though car insurance is a legal requirement, many drivers still choose to ignore it. This is where uninsured/underinsured motorist coverage can help.

Uninsured motorist coverage will help pay for damages if you are in an accident with another driver who does not have insurance coverage or if you are a victim of a hit-and-run accident.

Underinsured coverage comes into play if another driver’s insurance policy limits have been exhausted on your claim. Then, your underinsured coverage will kick in to pick up the remainder of the tab up to your policy limits.

– Medical Payments/Personal Injury Protection

 

Known in short as PIP or med pay, this coverage will pay for your own medical expenses and lost wages as a result of an accident.

In some cases it will also pay for the help you may need to hire around the house, such as housekeepers or someone to watch children, in light of the accident.

– Collision

Collision coverage is in place for damages to your vehicle due to an accident. It is an optional coverage and you choose your policy limits and deductible.

– Comprehensive

Comprehensive is similar in that you also choose a deductible and the limits of the policy. However, it differs from collision coverage as it covers other perils not covered by collision coverage such as the following:

  • hail,
  • fire
  • hitting wildlife
  • natural disasters
  • theft
  • vandalism

Canceling your current car insurance in favor of one with a better rate may or may not be worth it, depending on the penalties for early termination.

Car insurance can be more affordable if you use an online price comparison tool to make sure you are getting the best price possible.

In fact, it may even allow you to add other coverages you may need at the same price. Don’t wait, compare today!

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