There are several reasons you might need to cancel your car insurance — maybe you’re switching providers, moving to another state or taking a break from driving altogether. While you can cancel your policy at anytime, you might have to pay a car insurance cancellation fee. On the flip side, you could be entitled to a refund. This guide walks through how to cancel auto insurance, when it’s appropriate to do so and what to expect if you simply stop paying your bill.

What happens when you cancel your car insurance policy?

What happens after car insurance cancellation depends on when and why you’re canceling. All states except for New Hampshire require car insurance if you have active registration tags on your vehicle. Minimum coverage requirements, as well as fines and penalties for not having insurance, vary by state. Penalties could include suspension of your license and even jail time.

Driving without insurance leaves you financially vulnerable if you’re at fault in an accident. Without insurance, you’d be responsible for paying out of pocket for any injuries or property damage you cause — costs that can quickly add up, especially after a serious crash.

A lapse in coverage may also make it more difficult for you to purchase a new policy when you need one. You may lose discounts, such as loyalty discounts, if there is a gap between your old policy and the new one. And if you’ve been without insurance long enough, some providers may consider you a higher risk, which usually means higher rates.

How to cancel your car insurance

Although every car insurance company has its own procedures, it should be fairly simple to contact the company and begin the process of ending your coverage. Note that each state has regulations regarding when you should surrender your license plates (if you’re not getting a new policy) — whether it’s before or after you cancel your existing policy.

Here’s how to go about canceling, step by step:

1. Purchase new coverage if you intend to keep driving. This should be done before you cancel the old policy to avoid a lapse in coverage, which could cause your rates to rise.
2. Call, email or chat with your current insurer. Contact your agent or another company representative to find out exactly what’s necessary to cancel your existing policy. Do you need to pay a cancellation fee? Are you entitled to a refund for unused premiums? There may also be other requirements, such as giving 30 days’ notice. An agent or customer service representative should be able to answer these questions.
3. Sign a cancellation letter, if required. Not all insurers ask for this step, but if it is required, it will likely contain information about your policy and the amount of time left on it.
4. Request a policy cancellation notice. You may receive this automatically, but if not, you can request it. Having confirmation of the cancellation date and when you notified the insurer is helpful for your reference and in case anything goes wrong.

When you should cancel your car insurance

For drivers making a carrier switch, purchasing a new policy ahead of your current policy’s expiration is good practice. If you are making a permanent cancellation, consider talking through your situation with an insurance agent to make sure that missing coverage will not put you at legal or financial risk.

When you move

Moving will likely affect your premium, as location is a key factor in determining your rate. If you’re relocating within the same state, you may need to work with a new local agent, but your policy should remain intact. However, moving to a different state could require transferring your policy — or canceling it and purchasing a new one that meets the minimum requirements of your new state.

If your current insurer doesn’t operate in your new area, you may need to shop around for coverage from another provider. Be sure to review the insurance requirements in both states. For example, New York requires drivers to surrender their license plates before canceling a policy. Maintaining a few days of overlapping coverage can be a smart move to avoid potential fines.

When you do not have a car

When you sell a vehicle with no plans to replace it, you can cancel your auto insurance. However, it is usually a good idea to hold off on discontinuing coverage until the new owner takes possession and the title is transferred to them. Check with your local DMV to see if you are responsible for turning in your license plates or if they stay with the new owner. If you plan on getting a new car within a few months of selling your old one, you may want to speak with an agent about converting your policy to a non-owner policy. This may help you avoid an insurance lapse, maintain the policy discounts you earned with the company over time and avoid a possible rate increase.

When you want a better deal

You may decide to switch your auto insurance provider to get a better rate. Again, it is usually a good idea to secure a new policy before dropping your current coverage. Having the start date of your new policy match the intended cancellation date of the old policy is the best way to ensure there will be no lapse in coverage. Experts recommend shopping for a new insurance company at least six to eight weeks before your coverage is set to expire.

When you want to reduce coverage

If you have an older vehicle you own outright, you might consider dropping optional collision and comprehensive coverage. Consider the risks beforehand, though. It is important to note that if you discontinue collision and comprehensive, you will likely have to pay out of pocket if your car is damaged in an accident you cause or stolen, so you need to be prepared financially. This would be considered a policy amendment, not a policy cancellation.

When you’re covered under someone else’s policy

You may wish to cancel your insurance if you are a member of a household where another person has coverage and you can be added to their policy. This is most likely to be the case if you get married, but could also be appropriate for adult children moving back home. Adding a driver to an existing policy might increase your premium, but there may also be discounts available to help mitigate the increase.

Keep in mind that insurance follows the vehicle, not the person, so if you drop coverage on your car by canceling your policy, you’d need to add that vehicle to the other person’s policy to ensure coverage. Thankfully, a multi-vehicle policy usually results in a discount.

When you should not cancel your car insurance

While you can cancel your auto insurance anytime, you may not always need to. Before canceling your coverage, it might help to think through why you no longer need insurance and create a strategic approach to prevent potential issues.

When you will be driving

Canceling coverage on a vehicle you still plan to drive is not the best idea, as it could put you at financial risk and potentially violate state laws. Speak with a licensed insurance agent to learn more about how driving your vehicle without insurance could affect you.

When you get married or divorced

Getting married or divorced usually indicates that a policy review and changes are needed. You can add a new spouse to your current auto policy and may even earn a discount for tying the knot. You could potentially also qualify for a multi-policy discount if you and your new spouse have insurance with the same company. If you get divorced, you can typically remove your ex-spouse’s name from your current policy instead of canceling the policy altogether.

When you are only temporarily not driving

If you plan on taking a break from driving for an extended period, some car insurance companies will allow you to suspend your car insurance and put your vehicle on a storage plan. Make sure you discuss this option with your agent when canceling, as you typically cannot drive or move the vehicle while it has storage-only coverage on it. In some places, you will have to send a written request for suspension or cancel your license plates, while in other states, you can simply call your agent. If you cancel your insurance policy instead of suspending it, your insurance company will likely view this break as a lapse in coverage and your insurance premium may increase when you purchase a new policy.

When your premium is high

If your insurance bill is higher than expected, canceling shouldn’t be your first move. Instead, you could ask your agent about potential discounts. Most auto insurers offer several — like discounts for driving safely, taking a driving course, having a vehicle with certain safety features or enrolling in autopay.

If your current company’s rates still seem high, you’ll want to shop around with other insurers to find and secure a lower-cost policy before getting rid of your existing policy. Canceling without alternative coverage in place can result in an insurance lapse, which often causes your rate to increase when you go to buy insurance again. Plus, it’s illegal and financially risky to drive without coverage altogether.

If I cancel my auto insurance, will I get a refund?

If you paid your premium in advance and cancel your policy before the end of the term, the insurance company might refund the remaining balance. Most auto insurers will prorate your refund based on the number of days your current policy was in effect.

The insurance industry is highly regulated, and each state has insurance statutes that govern how companies must handle refunds. In Nebraska, for example, an auto insurer must contact you within 15 business days of cancellation to inform you about any eligible refunds. In many states, like Texas, if you finance your premium through a premium finance company, the insurance company may return the unused premium to the finance company, not you.

Unless otherwise stated in a statute, auto insurance companies usually do not have the obligation to refund your money within a given time period. To avoid refund headaches, it is best to notify your auto insurer of your plans to cancel when it is almost time to renew. Check with your carrier before canceling to learn more about its insurance cancellation policy.

Car insurance cancellation fees

Depending on the auto insurance company, canceling your policy before the end of its term may result in a cancellation fee. State laws can determine if a fee is allowable. If so, it is up to the insurer to set that fee, which is often taken out of the prorated refund.

Cancellation fees can be a flat fee or a short-rate fee. With short-rate cancellations, the insurer will charge the policyholder a percentage of the unearned premium — usually 10 percent. This amount will be taken from the remaining refund, or the policyholder will receive a bill if there isn’t a refund owed.

What happens if you stop paying your premiums without canceling your car insurance policy?

If you want to discontinue your coverage, it is best to contact your insurer or your agent. If you stop paying your premiums but do not cancel your policy, your carrier will eventually cancel your policy for nonpayment. However, there may be charges for insurance coverage up until that point, along with possible late fees.

Failing to properly notify your insurer that you want to cancel may even impact your ability to secure coverage in the future. Even if you intend on finding a new car insurance company, missing payments entirely could lead to poor payment history and make securing affordable rates more difficult. Similarly, if you have automatic bank account withdrawal enabled to pay your premiums, you may continue to pay for coverage that you do not intend to keep.

Notifying your insurance company of your intent to cancel, along with providing a specific cancellation date, allows the insurer to follow the appropriate cancellation procedures — such as notifying the DMV of the cancellation on your behalf and starting the refund process.

Frequently asked questions

• Should I cancel my car insurance if I go on an extended vacation?
  

  Because gaps in coverage may negatively impact your future premium, foregoing auto insurance — even for an extended vacation — likely is not worth it. If you plan to be away for a month or longer and your vehicle will not be in use, there may be other ways to save on your premiums without canceling your policy. Experts recommend speaking with an agent to learn about your options.

• Do I need to cancel my policy if I move to another state?
  

  When you move, you will need to register your vehicle in your new state of residence and purchase a policy that aligns with the state’s auto insurance laws. Many major insurance providers operate in most U.S. states and Washington, D.C., so you may be able to stay insured under your current carrier, although your rates are likely to change even if you move a short distance. If you do need to find a new insurance carrier, shopping for quotes and securing coverage before you move to another state can make the transition easier.

• Can I cancel some coverages without canceling the entire auto policy?
  

  Some drivers choose to drop additional coverage types, such as optional comprehensive and collision, after they pay off their vehicles. This may be more suitable for drivers with older vehicles who would pay more in premiums than it would cost to fix their damaged cars. In cases like this, you may consider dropping non-essential coverage and keeping liability-only policies.

• Can my insurance company cancel my coverage?
  

  Yes, your insurance company can cancel your coverage. If you do not pay your premium on time, lie on your auto application or your driver’s license gets suspended or revoked, your insurer could cancel your policy. If this happens, you can ask your insurer if there are steps you can take to reinstate your policy. If reinstatement isn’t possible, you may shop for a new carrier before the policy cancels to avoid a lapse in coverage, which can cause your rates to increase.

• Do I have to cancel my insurance if I sell my car?
  

  Not necessarily. As we noted above, if you are selling your car and immediately purchasing a new one, you may be able to transfer your policy to the new vehicle, keeping in mind that your rates and coverage needs will change. If you prefer to change to a different company at that time, just be sure there is no gap in coverage between the selling of the old vehicle and purchase of the new one. If you will be driving in the future, but not in your own car, a non-owner policy may be the right choice for you. If, however, you will not be driving anymore, you can cancel your policy outright.

• What if your insurance company cancels your policy?
  

  Your insurer could cancel or non-renew your policy for several reasons. For example, if you earned one or more serious moving violations on your driving record, your carrier might decide you’re too high a risk for them to cover you. If that happens, you will need to find another company to underwrite your policy. Don’t assume that if one company turns you down, the rest will also. Every company has its own method of determining who they will cover, and shopping around may lead you to another insurer who does not weigh your infractions as heavily. In some cases, your best bet may be to look at companies known for writing high-risk insurance.