A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 19, 2021

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Here's what you need to know...

  • As a policyholder, you have the right to cancel your auto insurance policy at any time and for any reason
  • Your premiums are guaranteed to stay fixed after your policy is issued, but you are free to cancel the policy mid-term
  • If you buy a new insurance policy, you need to notify your existing carrier so that the policy can be cancelled and any refund owed can be issued
  • Since an insurer can’t legally require you to have double coverage, the cancellation must be backdated to your new policy’s effective date as long as you submit proof
  • If you sold your car, you can cancel your insurance effective the day that you sell the car
  • If you don’t release liability on the sold vehicle immediately, wait to cancel your insurance or you could be fined for allowing coverage to lapse
  • Send your cancellation request in writing to prevent issues down the line and to protect yourself

When you sign up for auto insurance and you make your initial payment, you are agreeing to abide by the terms of the contract so that the insurer will pay covered claims you make. Even though this is a contract, as a policyholder you’re free to exit the contract at any time and for any reason. The insurance company definitely doesn’t have the same freedoms as you do when it comes to ending the contract. Start comparing car insurance rates now by using our FREE tool above!

As a wise consumer, it’s always important to know your rights when you’re entering into any type of financial contract. You should know not just what types of coverage you’re buying into, you should also know what your duty is when you’re ready to cancel the policy or end the coverage when the renewal date comes. Here’s your consumer guide so that you don’t get stuck paying twice for coverage you can only use once:

When can the insurance carrier cancel a policy?

Consumers have rights when they purchase auto insurance. Insurance carriers aren’t afforded these same rights. To prevent predatory tactics and unfair discrimination, an insurance company can only cancel a policy after it’s been issued if certain conditions have been met.

Within the first 60 days of issuance, companies are typically free to cancel a policy for any reason. After this 60 days, valid reasons that a company can send you a notice for cancellation prior to your renewal date include:

  • Non-payment of premiums
  • Suspension or revocation of driver license
  • Fraudulent claims

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When can a named insured cancel their own policy?

Only a named insured is free to cancel their policy. This means that drivers who are listed on the policy but don’t hold named insured status don’t have authorization to terminate coverage. If you’re a named insured, you can submit a request to terminate your coverage at any time.

You don’t have to give a reason, but giving a valid reason may help you avoid paying early termination fees once the paperwork in processed.

Some of the various reasons you might want to cancel your policy before it comes up for renewal include:

  • Saving money with a new carrier
  • Switching to a new carrier because you are dissatisfied with service
  • Moving to a new state and need to buy insurance from a carrier in the state
  • You are selling your only car
  • You need coverage through a company that offers SR-22 filings
  • You no longer have a license and need coverage
  • Your vehicle is no longer operable and you have registered it non-op through the DMV

If you get new insurance, when should you cancel your old policy?

If you were in a rush when you applied for your insurance, you might be paying too much. After you take the time to really shop around, you’ll find a company that’s offering low prices for drivers in your risk class.

Luckily, since you’re allowed to cancel your policy mid-term, you don’t have to wait until the policy renews to take advantage of the savings.

It’s advised to submit your payment for your new policy before cancelling your existing coverage. Be sure that the policy is fully underwritten and issued before you cancel the policy that you have. Once you’re sure that the quote you received was accurate, you can submit your cancellation request. Since you had coverage with a past effective date, your old insurer will go back to that date and process the cancellation. If it’s more than a week in the past, the company may request a copy of your new insurance as proof for backdating the cancellation.

When should you cancel insurance after you sell your car?

If you no longer want to rely on a vehicle, it’s time to list it for sale. After you’ve given test drives and negotiated, you can officially say you’ve sold a car on your own. You need to be sure to sign over the title and draft out a bill of sale that shows the date of sale and the buyer’s name so that you can use this document to transfer ownership.

It’s tempting to call your insurer and cancel your policy immediately after you hand over the keys but it’s not advised. You’re required by law to carry auto insurance and the requirement still exists until you’ve released liability. So don’t ever cancel your coverage until you’ve submitted your release of liability or you’ll be fined. You can request the date back to the date of sale as long as you have proof.

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If your car is in storage, can you cancel your coverage?

When a vehicle is inoperable, it could sit for weeks or months without being driven. Some owners decide to store a car for months or years. If this happens, you can register your vehicle as Planned Non-operable. With a PNO plate, you aren’t required to carry liability insurance. You can cancel your coverage as long as you don’t want comprehensive coverage to pay for damage sustained while the car is parked. Only cancel your coverage if you turn in your plates or you’ll be penalized.

Are there fees for canceling your insurance?

Auto insurance companies are free to charge early termination fees in most states. Even though it’s allowed, not all companies charge these fees. Check your policy contract and see if you’re issued a pro-rated refund or a short-rate refund. If it says short-rate, this means a fixed fee or a percentage of the premiums you haven’t yet paid.

Always check into the fees that you’ll be charged before cancelling your coverage.

If it costs you more than you’re saving to cancel early, switching carriers might not make sense. If you’re interested to find a more affordable plan now that you know that you can cancel your insurance, use an online comparison tool. Once you’ve found the best plan, wait until your policy is issued and send in your written cancellation request. Compare now by entering your zip code in our FREE tool below and get instant car insurance rates!